Central Banks Accumulate Gold

According to the World Gold Council (WGC), central banks have been buying gold at a rate not seen since World War II.

Net purchases by central banks reached 651.5 metric tons in 2018, 74% more than the previous year when 375 tons were purchased. The WGC has estimated that central banks now hold about 34,000 tons of gold.

A wide combination of factors has led to the resurgence of gold, according to research firm Bernstein.

They include geopolitical risk, concerns about government debt, supply problems, and the perception that gold offers better returns on other assets.

We believe that the upward trend of the US public deficit and a level of government debt to GDP of 105% in that country are factors that motivate central banks to seek to diversify their international reserves.

In the last six months the price of gold has increased 12%.

10-year US Treasury bond rates have fallen from 3.23% last November to 2.65%, increasing the incentive to seek diversification of central bank assets.