UBS, the prominent banking giant, foresees a substantial surge in demand for gold by central banks worldwide. In their latest report, UBS predicts that central banks will amass 700 metric tons of gold, equivalent to $48.74 billion, this year. Inflation concerns and geopolitical uncertainties drive this shift.
Central Banks’ Gold Accumulation Continues :
According to UBS, the past year witnessed the 13th consecutive year of net gold purchases by global central banks, reaching a record-breaking level since 1950. In 2022 alone, central banks’ gold buying more than doubled to 1,078 metric tons compared to the previous year’s 450 metric tons. Based on the World Gold Council’s 1Q23 data, central banks are on track to procure approximately 700 metric tons of gold in 2023, surpassing the average of below 500 metric tons since 2010.
Persistent Inflation and Geopolitical Concerns Drive Demand :
Persisting inflationary pressures and heightened geopolitical risks are the primary catalysts for central banks’ continued stockpiling of gold. UBS expects this trend to persist as central banks seek to hedge against uncertainties in global markets. The banking giant emphasizes that the weaponization of the US dollar has made nations worldwide reluctant to increase their reserves of the American currency, reinforcing the appeal of gold as a reliable store of value.
US Dollar Sanctions Leave Long-lasting Impression :
UBS further highlights the enduring impact of the US freezing Russian foreign exchange reserves due to the Ukrainian conflict. This significant move has led to a cautious approach among central banks, altering their behavior and prompting a reassessment of the US dollar’s reliability. As a result, central banks are actively diversifying their reserves and allocating more resources toward gold, a precious metal known for its stability and long-term value.
With UBS’s prediction of a substantial increase in central banks’ gold reserves this year, it is evident that countries are gravitating towards the glittering metal to safeguard their wealth amid dollar uncertainty and geopolitical tensions, emphasizing the enduring appeal of gold as a strategic investment.
