SURVEY: CENTRAL BANKS INTEND TO INCREASE THEIR GOLD RESERVES

In June 2019, the World Gold Council (WGC) conducted its second annual Central Bank Gold Reserves (CBGR) survey. 11% of EMDE central banks surveyed said they intend to increase their gold reserves over the next 12 months. This is similar to last year’s purchases, when 12% of the world’s 155 Emerging Market and Developing Economies (EMDE) central banks bought gold.

The reserve management objectives of EMDE countries are focused on self-insurance against balance of payments crises. This makes gold especially well suited in the current environment given its tendency to rally during times of systemic financial stress.

In its inaugural RAMP Survey on the Reserve Management Practices of Central Banks, the World Bank surveyed 99 central banks on their motives for holding foreign reserves. The banks were given five options: to provide self-insurance against potential external shocks; conduct foreign exchange policy; service external debt obligations; support monetary policy operations and ensure savings for intergenerational equity. The results were categorised by low-income; lower-middle income; upper middle-income; high-income non-reserve and high-income reserve countries.

100% of respondents in the low and lower middle-income groups cited self-insurance against potential external shocks and servicing external debt or obligations as highly relevant. This compared with 87% in upper middle-income, 81% in non-reserve high income countries and 44% in reserve high income countries.

Source: Rajesh Bajaj, Chief Editor, Heera Zhaveraat International, India www.heerazhaveraat.com