#黄金分析##黄金##美元##俄乌战争##美元霸权#
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Gold prices have been rising in recent years due to strong buying by central banks, mainly due to the fact that gold is increasingly seen as a geopolitical hedging tool.
Last week, a senior IMF official noted that the potential fragmentation of the global economic and financial order was driving the rise in gold prices.
Gita Gopinas, Deputy Managing Director of the International Monetary Fund, said: "After years of shocks, including the coronavirus pandemic and Russia's war with Ukraine, countries are reassessing their trading partners based on economic and national security concerns. ”
She stressed that some countries, in particular, were reconsidering their heavy reliance on the US dollar in international transactions and foreign exchange reserves.
Gopinas said there had been an uptick in demand for gold because it was seen as a "politically neutral and safe asset that could be stored domestically and not affected by sanctions or seizures." ”
In a recent report, the World Gold Council said that in 2022 and 2023, central banks bought more than 1,000 tonnes of gold per year, accounting for a quarter of global gold demand.
According to the committee, many central banks continued to buy gold, snapping up 290t in the first quarter of this year, the strongest start on record.
1. Gold as a hedge against the risk of US dollar sanctions
Concerns about the dollar's enormous influence and hegemony in the world economy have been around for years. The West's unprecedented sanctions against Russia over its war with Ukraine, and in particular the weaponization of the dollar, have further added to the momentum for de-dollarization.
Admittedly, the dollar's influence in the global economy is deeply entrenched, and most experts expect that in the foreseeable future it will not lose its dominance as the world's reserve currency.
But some countries around the world, especially those that side with China, are increasingly hedging their political risks by adding to alternative assets, particularly gold.
Gopinas said the share of gold in the foreign exchange reserves of "countries that stand with China" has been rising since 2015.
In contrast, the share of gold in the foreign exchange reserves of the countries of the "American bloc" is more or less stable.
Gopinas said this suggests that some central banks may be buying gold due to concerns about the risk of sanctions.
In the case of China, gold's share of its foreign exchange reserves increased from less than 2% in 2015 to 4.3% in 2023, while its holdings of U.S. Treasury and agency bonds fell from 44% to about 30%, Gopinas noted.
Second, despite the high price of gold, central banks will continue to buy
While China's central bank has been dominating the headlines for its gold purchases, other central banks are also hoarding gold. In its recent report, the World Gold Council wrote that other large gold buyers include Turkey and India.
Analysts at JPMorgan Chase & Co. wrote in a March note that they expect some central banks to continue to accelerate the pace of buying this year and be "less price-sensitive." This means that gold prices are likely to remain elevated this year.
To be sure, the ongoing gold buying frenzy is not based solely on geopolitics.
The current surge in gold prices has also been helped by a stronger US dollar, which has prompted some emerging countries to hedge against the risks posed by a stronger US dollar to their currencies.
Spot gold is currently trading at around $2,340 an ounce, down from an all-time high of more than $2,400 an ounce in April.
The US dollar has become so weaponized that central banks are snapping up politically-neutral gold. By Huileng Tan on Business Insider, May 14, 2024.
Gold prices are on a tear recently thanks to strong buying by central banks — a signal that the precious metal is increasingly seen as a geopolitical hedge.
Last week, a top International Monetary Fund official pointed to gold's role in a potential fragmentation of the global economic and financial order.
"After years of shocks — including the COVID-19 pandemic and Russia's invasion of Ukraine — countries are reevaluating their trading partners based on economic and national security concerns," said Gita Gopinath, an IMF deputy managing director
In particular, some countries are rethinking their heavy reliance on the US dollar in their international transactions and foreign reserve holdings, she said.
Demand for gold has risen because it's seen as a "politically neutral safe asset, which can be stored at home and be insulated from sanctions or seizure," said Gopinath.
Central banks accounted for one-quarter of gold demand in 2022 and 2023, as the institutions bought over 1,000 tons of gold each year, according to the World Gold Council in a recent report.
The world's central banks continued buying gold, snapping up 290 tons of gold in the first quarter of this year — the strongest start to any year on record, according to the council.
Gold as a hedge against US dollar-based sanctions risk
Concerns about the US dollar's outsized influence and power in the world economy have been brewing for years. The West's unprecedented slate of sanctions and weaponization of the dollar against Russia over the invasion of Ukraine have heightened the push for de-dollarization.
To be sure, the greenback is so entrenched in the global economy that most experts don't expect it to lose its dominance and status as the world's reserve currency in the foreseeable future.
But countries around the world — particularly those aligned with China — are increasingly hedging their political risks by loading up on alternative assets, and in particular, gold.
The share of gold in the foreign reserves of the "China bloc" has been rising since 2015, said IMF's Gopinath. Other than Russia, she did not name any other country in the "China bloc."
In contrast, the share of gold in the foreign reserves of countries in the "US bloc" has been broadly stable.
This suggests that gold purchases by some central banks may have been driven by concerns about sanctions risk, Gopinath said.
In China's case, the share of gold in its foreign exchange reserves increased from under 2% in 2015 to 4.3% in 2023. Meanwhile, its proportion of holdings of US Treasury and Agency bonds fell from 44% to about 30%, according to IMF's Gopinath.
Central banks will keep buying, despite high prices
While China's central bank gold buying has been hogging the headlines, other central banks are also loading up on gold. The World Gold Council wrote in its recent report that other big gold buyers included Turkey and India.
JPMorgan analysts wrote in a March report that they expect central banks to continue with their pace of buying this year while being "less sensitive to prices." This means gold prices are likely to stay high this year.
To be sure, the ongoing gold rush is not just based on geopolitics.
Gold's current price surge is also helped by a strong dollar, which is spurring some emerging countries to hedge their currency risks.
The spot gold price is currently around $2,340 an ounce, down from its record-high above $2,400 an ounce in April.