Analysts are predicting the trend of buying gold by central banks across the world to continue into 2020, Seeking Alpha writes.
Taking its gold reserves to over $100 billion this year, the Bank of Russia has been one of the forerunners of the gold-buying spree.
Through the end of October, net official-sector purchases this year totaled 562 metric tons, says Alistair Hewitt, director of market intelligence with the World Gold Council. That 56.2-tons-a-month average puts sales on pace to roughly match the 656 tons bought in 2018, which were the most central-bank purchases since 1967, according to WGC data.
“This year has been exceptionally strong. We think that next year, net buying will continue at a high level, even if it’s not as high as this year,” said Philip Newman, director of the London-based consultancy Metals Focus.
Goldman Sachs looks for global central banks to collectively acquire around 650 tons in 2020, while Standard Chartered is projecting central-bank purchases will total 525 tons.
“It’s still elevated,” said Suki Cooper, precious-metals analyst with Standard Chartered. “That is still firmly on the buy side.”
Hewitt commented that central banks are looking at three main criteria when deciding to expand the amount of gold they hold within their foreign-exchange reserves.
“For a central bank, gold is a fantastic asset because it’s safe, liquid and generates returns over the long term,” Hewitt said.
He also listed two more factors why the central-bank buying has suddenly jumped in recent years.
“One issue is we are seeing heightened geopolitical tensions,” Hewitt said, with these involving major gold-buying countries and economies. “Central banks are looking toward gold to balance some of that risk. We’ve also got negative rates and yields for a large number of sovereign bonds.”
