It’s not just investors and jewelry buyers who stockpile gold: The global central banks hold 20% of all gold ever mined.
Why do banks consider gold a crucial component of their financial reserves?
Gold helps maintain a balanced foreign exchange reserve by mitigating currency risks.
Investing in gold safeguards banks against the depreciation of standard currencies, especially the US dollar, which can be impacted by inflation or other factors.
Gold is a great means of portfolio diversification. When the dollar’s value decreases, gold prices tend to increase, offering protection against market fluctuations.
Why did banks switch from selling to buying?
Between early 1990s and late 2000s, central banks were net sellers of gold due to good macroeconomic conditions and a downward trend in gold prices.
However, their attitudes changed following the 1997 Asian financial crisis and later, the 2007–08 financial crisis. Every year since 2010, central banks have been net buyers of gold.
Why are emerging markets among the largest gold buyers?
Emerging economies like Russia, China, India and Turkey have accumulated gold reserves to protect themselves against financial and geopolitical uncertainties that affect popular traditional currencies.
In contrast, Switzerland, France, the Netherlands and the UK were the largest gold sellers from 1999 to 2021.
Do you consider gold a stable asset for trading? React with if yes.
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