Increasingly, big banks are keeping gold at home instead of offshore, as they wait to buy another safe-haven asset amid global tensions.
This is one of the results of the annual survey of the Central Reserve Bank of Gold of the World Gold Council.
It found that monetary authorities still see gold as an important hedge against inflation, country shocks and currency risk, despite the recent decline in prices during the Iran conflict.
The future of gold.
Big banks have bought an average of 1,000 tonnes a year over the past four years – double the average over the past decade, according to each survey. Nearly nine out of 10 banks that responded said they expect their global bank gold reserves to grow next year, with 45% expecting theirs to grow. Only 1% expect savings to decrease.
The survey, carried out between February and May and based on responses from 74 central banks, also points to more central banks choosing to hold most of their gold at home, rather than in high-use places, such as the Bank of England or the Federal Reserve Bank of New York.
Gold spot prices.
A total of 9% of respondents said they had increased their home storage in the past 12 months, up from 5% last year. Another 10% said they had split their holdings overseas, compared to 2% in last year’s survey.
Analysts say the deterioration of geopolitical relations is prompting the reassessment. Russia’s invasion of Ukraine and the subsequent freezing of an estimated $300 billion worth of Russian foreign assets are raising concerns about how safe havens held abroad will fare in times of political tension.
Why gold storage is getting closer to home
“The fear that these assets will not be accessible abroad, starting in 2022, is driving the big banks to return the gold stored abroad,” said Giovanni Staunovo, a commodity analyst at UBS, told CNBC.
Staunovo added that gold often has symbolic value as a national asset, which creates an additional incentive to keep savings at home.
He said the French central bank has been reducing exposure recently by selling gold in the US and buying an equal amount in Europe, despite bullish volatility.
“We expect that central banks will buy 750-1,000 tons of gold this year. Such demand may not drive very high prices by itself, but we believe that it will provide a stable base for the market and help eliminate soft jewelry and investment demand,” said Staunovo.
A survey by the World Gold Council found that 7% of respondents said they plan to increase their domestic storage next year, while 9% expect to change their storage plans overseas, up from 2% in the last survey.
Dan Coatsworth, head of markets at AJ Bell, said the survey findings reflect a wider effort by big banks to reduce concentration, both in their assets and where they are stored.
“Like any investment, it’s wise to spread the risks – and that includes where the assets are stored,” he said.
