A recent annual survey by the World Gold Council reveals that a growing number of central banks are opting to hold their gold reserves within their own countries rather than overseas. This strategic shift is driven by expectations that they will need to acquire more of the safe-haven asset amid escalating geopolitical tensions.
The survey indicates that, despite a recent pullback in gold prices following events involving Iran, monetary authorities continue to view gold as a crucial tool for hedging against inflation, geopolitical shocks, and currency risks.
Findings show that over the past four years, central banks have purchased an average of 1,000 tonnes of gold annually. This figure is double the average rate seen over the preceding decade. Nearly 90% of the surveyed central banks anticipate that global central bank gold holdings will increase over the next year, with 45% expecting their own reserves to grow. Only 1% foresee a decrease.
Conducted between February and May this year and based on responses from 74 central banks, the survey also highlights a trend towards greater domestic storage of gold reserves, moving away from traditional locations such as the Bank of England or the Federal Reserve Bank of New York.
Specifically, 9% of respondents reported increasing domestic storage over the past 12 months, up from 5% a year earlier. An additional 10% stated they had diversified their overseas storage locations, a significant increase from just 2% in the previous survey.
Analysts attribute this reassessment of reserve strategies to deteriorating geopolitical relations. Concerns about accessing overseas holdings during political crises were heightened following the freezing of approximately $300 billion in Russian foreign assets after the outbreak of the Ukraine conflict.
Giovanni Staunovo, a commodities analyst at UBS, commented, "Since 2022, some central banks have been repatriating their foreign-held gold due to concerns about its accessibility."
Staunovo added that gold, as a national asset, often carries symbolic significance, which further motivates central banks to keep reserves within their borders.
He noted that the French central bank has recently been adjusting its gold exposure by selling reserves held in the United States and purchasing equivalent amounts in Europe, thereby avoiding the physical transfer of bullion.
"We expect central banks to purchase between 750 and 1,000 tonnes of gold this year. While this demand alone may not dramatically push prices higher, we believe it will provide a stable floor for the market and help offset weaker jewelry and investment demand," Staunovo further stated.
The World Gold Council survey found that 7% of respondent central banks plan to increase domestic gold storage in the coming year, while 9% expect to diversify their overseas storage arrangements, up from 2% in the prior survey.
Dan Coatsworth, Market Director at AJ Bell, said the survey results reflect a broader effort by central banks to reduce concentration in both their assets and the locations where they are held.
"As with any investment, diversification is a prudent approach—and that includes the geographic location of holdings," he said.
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