Russia and China's desire to ditch the dollar is fueling gold prices.
In a new report, the central bank said the precious metal had risen to new all-time highs despite a global outflow from gold exchange-traded funds (ETFs) and risk aversion in financial markets amid the Fed's tight monetary policy over the past two years.
Citing data from the World Gold Council (WGC), the bank said demand for gold was driven by Russia and China, pointing to “diversification away from dollar assets for macroeconomic or geopolitical reasons (‘de-dollarization’)” as a bullish factor driving the price up.
“While the dollar remains the dominant currency, its share of central bank reserves has fallen to 59%, a 25-year low (IMF).
Overall, central bank demand for gold has doubled over the past two years (March 30, 2021 to March 30, 2023) compared to previous years, which has had a significant impact on the price.
The bank adds that Chinese and Indian retail investors are also pushing gold prices to new record highs.
“Moreover, since 2024, Chinese and Indian households have significantly increased their investments in gold excluding jewellery (by a further 68% and 19%, respectively, between Q1 2023 and Q1 2024, according to WGC data), apparently to diversify their investments amid the sharp downturn in property and equity markets in China and to increase savings opportunities in India.”
Gold has jumped from a 2022 low of $1,614 an ounce to an all-time high of $2,685 this month, up 66%. At the time of writing, gold is trading at $2,658.
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