Emerging markets are increasingly turning to gold purchases, while reserve currencies such as the U.S. dollar are facing significant challenges.
Central banks demand for gold has peaked in three years. Indeed, according to the latest update of the World Gold Council, during the first half of 2018, demand increased by 8% compared to the same period in 2017.
2018 marks the largest demand for gold purchases by central banks since 2015. In total, 193.3 tonnes of gold were added to central bank reserves, compared with 178.6 tonnes during the same period last year.
In addition, emerging markets such as Turkey, Russia and Kazakhstan played an important role, representing for 86% of central banks' orders in the first half of 2018.
Recently, Egypt purchased gold for the first time since 1978. Thailand, India, Indonesia and the Philippines are also back on the gold market after years of absence.
Many emerging market central banks would turn to gold as a natural hedge against other reserve currencies after years of exposure to the US dollar, according to the World Gold Council.
Indeed, some reserve currencies face significant problems: the euro is exposed to political and economic challenges, the yuan remains relatively undeveloped and the pound sterling continues to face the uncertainty of the Brexit.
The World Gold Council maintains that gold is a strategic asset that can help central banks achieve their tactical objectives where the international monetary system is gradually moving away from a system dominated by the US dollar towards a multipolar system.
Posted by : BUNKER GOLD&SILVER