The 2019 Central Bank Gold Reserves (CBGR) survey points to continued robust central bank demand for gold in the short and medium term. A good 11 per cent of emerging market and developing economy (EMDE) central banks surveyed say they intend to increase their gold reserves over the next 12 months.
This is similar to last year’s purchases, when 12% of the world’s 155 EMDE central banks bought gold. This gave rise to 651 tonnes of central bank gold demand, the highest level on record under the current international monetary system.
The planned purchases are being driven by higher economic risks in reserve currencies. In the medium term, central banks see changes in the international monetary system, with a greater role for the Chinese renminbi and gold. 39% of EMDE central banks cited anticipated changes in the international monetary system being relevant to their decision to hold gold.
The level of international reserves held by central banks increased sharply after the 2008 global financial crisis and remains elevated today. Seven out of ten central banks surveyed say they are holding a higher level of total reserves than five years ago. 62% of EMDE central banks say this is mainly as a buffer against balance of payments crises.
Over the next five years, participants see a growing role for the Chinese renminbi and gold in international reserves. In Q4 2018, the US dollar accounted for 55% of total reserves, the euro 18%, gold 11% and the renminbi 2%. Over three quarters of all central banks expect the renminbi’s share to increase over the next five years.
Four in five central banks surveyed hold gold as part of their international reserves. This is the same for advanced economy central banks and EMDE central banks, but their motivations for holding gold differ.
When asked to rank the relevance of factors underpinning their decision to invest in gold, EMDE central banks put “longterm store of value” and “lack of default” in first and second position respectively. Gold’s role as “an effective diversifier” ranked joint third with “historical position”. Advanced economy banks put historical position first, reflecting their high legacy stocks from the Gold Standard and Bretton Woods days. The World Gold Council worked with YouGov, a public opinion and data company, to conduct a survey of central bankers’ attitudes towards, and operations in, the gold market.