A recent survey from the World Gold Council indicates that central banks globally intend to continue increasing their gold reserves over the next year.
In an environment of growing geopolitical fragmentation, a rising number of reserve managers are opting to hold more gold within their own borders or to diversify the locations where their overseas gold is stored.
Analysts note that central banks remain the cornerstone buyers for the precious metal.
As geopolitical tensions escalate, central banks are expected to persist in accumulating gold as a safe-haven asset, with a growing trend to store the metal domestically rather than overseas.
These findings are part of the World Gold Council's annual Central Bank Gold Reserves Survey.
The report states that, despite recent price dips influenced by events in Iran, monetary authorities still view gold as a crucial hedge against inflation, geopolitical shocks, and currency risks.
The survey reveals that over the past four years, central banks have purchased an average of 1,000 tonnes of gold annually, double the average annual volume of the preceding decade.
Nearly 90% of the surveyed central banks forecast that total global central bank gold reserves will rise in the coming year.
Furthermore, 45% of central banks plan to increase their domestic gold holdings, while only 1% anticipate a reduction.
The survey, conducted between February and May this year, gathered responses from 74 central banks.
It also found that more institutions prefer to keep the majority of their gold within their home countries, moving away from heavy reliance on traditional storage hubs like the Bank of England and the Federal Reserve Bank of New York.
Specifically, 9% of respondent central banks reported increasing their onshore gold storage over the past 12 months, a significant rise from 5% the previous year.
An additional 10% have diversified the geographical locations of their overseas gold holdings, up from just 2% last year.
Analysts attribute this shift in storage strategy primarily to deteriorating geopolitical relations.
The freezing of approximately $300 billion in Russian overseas assets following the Ukraine conflict has heightened concerns among nations that their reserve assets held abroad could become inaccessible in the event of a geopolitical crisis.
Giovanni Staunovo, a commodities analyst at UBS, explained in an interview that fears of asset freezes and inaccessibility have driven some central banks to begin repatriating gold stored overseas since 2022.
He added that gold's symbolic significance as a core national asset further incentivizes keeping reserves within domestic borders.
Staunovo cited the example of the Bank of France, which has been reducing its gold holdings in the United States while purchasing equivalent amounts in Europe, without physically moving the metal across borders.
He projects that central bank gold purchases will reach between 750 and 1,000 tonnes this year.
While this demand alone may not trigger a sharp surge in gold prices, Staunovo believes it will provide a solid fundamental floor for the market, offsetting potential weakness in demand from jewelry consumption and personal investment.
The World Gold Council survey also shows that 7% of respondent central banks plan to expand their domestic gold storage capacity in the next year, and 9% intend to diversify their overseas storage locations, a notable increase from the 2% reported in the prior survey.
Dan Coatsworth, investment analyst at AJ Bell, stated that the survey results reflect a broad-based effort by central banks to de-risk their asset allocation and storage locations.
He remarked that, as with any investment, diversification is a prudent strategy, and the same principle applies to the geographical placement of asset storage.
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