The proportion of gold held by global central banks has directly doubled over the past decade. Especially in countries like China, India, Turkey, and Poland, these are active buyers of gold. In particular, China bought a total of 2,264 tons in 2024.
Why is gold so popular? Just look at this year's gold prices, which have risen 35 times, totaling a 33% increase. The prices of precious metals have been rising for six days a week, and at their peak, they soared to $2,772 per ounce.
This year's return on gold is already 33%, outperforming the market by 10 percentage points, even surpassing the Nasdaq 100 index. Since the bull market that started in October 2022, the return on gold has reached 67%, which is 4 percentage points higher than the S&P 500 index.
The World Gold Council stated that banks purchased 483 tons of gold in the first half of this year.
Since mid-2022, due to concerns about U.S. financial sanctions and sovereign debt issues, the amount of gold purchased by central banks has directly doubled.
When Russia and Ukraine started fighting in 2022, the United States sanctioned Russia, resulting in Russia decoupling its economy from the dollar. This situation has inspired many other countries to reduce their dollar reserves and increase their gold holdings.
With the current geopolitical tensions, gold's position as a 'safe-haven' asset is becoming increasingly solid.
SPDR Gold Shares ETF is the largest gold exchange-traded fund, managing $78 billion in assets. In the past six months, $5 billion has flowed into it. Physical gold is also selling quickly, and Costco's gold bars have been sold out online.
If Trump wins, concerns about fiscal discipline, Federal Reserve independence, and inflation will surely increase, making gold even more attractive. Even if Trump does not win, the deficit issue remains a significant problem. Both major political parties do not pay much attention to fiscal discipline, and the Federal Reserve is inclined to lower interest rates. As a result, gold's position as a store of value will become more solid. Interest rates have a direct impact on gold. When interest rates drop, gold prices shoot up. Since the Federal Reserve lowered interest rates last month, although the 10-year Treasury yield has increased slightly, gold prices have continued to soar. This indicates that global investors are focused on long-term interest rate trends, anticipating that central banks will further lower interest rates.
