Central banks are increasing their gold reserves and moving bullion storage closer to home as geopolitical risks rise, according to the World Gold Council's annual Central Bank Gold Reserves survey [1]. The survey, conducted between February and May with responses from 74 central banks, found that monetary authorities continue to view gold as a key hedge against inflation, geopolitical shocks, and currency risk, despite a recent pullback in prices during the Iran conflict [1].
Over the past four years, central banks have purchased an average of 1,000 tonnes of gold annually, which is double the average of the previous decade [1]. Nearly nine in ten central banks surveyed expect global central bank gold reserves to increase over the next year, while 45% anticipate their own holdings will grow. Only 1% expect reserves to decline [1].
The survey also revealed a trend toward storing gold domestically: 9% of respondents increased domestic storage in the past 12 months, up from 5% a year earlier, and 10% diversified their overseas storage locations, compared to just 2% in the previous year's survey [1]. Analysts attribute this shift to deteriorating geopolitical relations, notably citing Russia's invasion of Ukraine and the subsequent freezing of approximately $300 billion in Russian foreign assets, which heightened concerns about the accessibility of reserves held abroad during periods of political tension [1].
UBS commodity analyst Giovanni Staunovo noted that since 2022, fears over inaccessible foreign assets have prompted some central banks to repatriate gold. Staunovo also highlighted that gold's symbolic significance as a national asset adds incentive for domestic storage. He cited France's central bank as an example, having reduced exposure by selling gold holdings in the U.S. and buying an equivalent amount in Europe without physically moving the bullion [1]. Staunovo expects central banks to buy 750-1,000 metric tonnes of gold this year, which may not drive prices sharply higher but should provide a stable foundation for the market and help offset weaker jewellery and investment demand [1].
CONCLUSION
Central banks are responding to rising geopolitical risks by increasing gold reserves and shifting storage closer to home, reinforcing gold's role as a safe-haven asset. While this trend is not expected to sharply boost prices, analysts believe it will provide stability to the gold market and offset softer demand from other sectors.