Advanced economies’ central banks expect the metal’s share of global reserves to rise at the expense of the dollar

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Advanced economies’ central banks expect gold’s share of global reserves to rise at the expense of the US dollar, as these institutions look to follow the lead of emerging markets in buying bullion.

Almost 60 per cent of rich countries’ central banks believe that gold’s share of global reserves will rise in the next five years, up from 38 per cent of respondents last year, according to an annual survey conducted by the World Gold Council, an industry promotion group.

Around 13 per cent of advanced economies plan to increase their gold holdings in the next year, up from around 8 per cent last year and the highest level since the survey began.

That follows the lead of emerging market central banks, which have been the main purchasers of gold since the 2008 global financial crisis. Meanwhile, a rising proportion of advanced economies — 56 per cent, up from 46 per cent last year — also think the dollar’s share of global reserves will fall over the next 5 years.

Among emerging market central banks, 64 per cent share this view. The demand for gold, which comes despite a sharp rise in the price of the yellow metal this year, highlights how allocations to the dollar have been declining as central banks have sought to diversify their holdings through alternative currencies and assets, especially after the US weaponised its currency in sanctions against Russia.

“This year we’ve seen much stronger convergence. More advanced countries are saying that gold is going to occupy more of global reserves and the dollar will be less,” said Shaokai Fan, global head of central banks at the WGC. “It wasn’t the emerging market countries evaluating these factors less but advanced markets catching up to how emerging markets feel about gold,” he added.

The survey — one of the few insights into the thinking of publicity-shy reserve managers — found that a record share of central banks since the survey began five years ago intend to increase their gold reserves over the next 12 months, at 29 per cent of respondents.

Of the emerging market respondents, nearly 40 per cent plan to raise their holding. The main reasons cited by central banks for holding gold are

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