Central banks around the world are increasing gold reserves and reducing the amount of the US dollar.
Over the past decade, central banks have increased their reserves of the precious metal by more than 4.500 tons.
Sputnik Brazil - Central banks around the world are increasing the amount of gold in their reserves, raising gold assets in 2021 to their highest value in 31 years, according to analysts consulted by the Japanese newspaper Nikkei Asia.
According to data from the World Gold Council, an international research organization in the gold industry, central banks have increased their reserves of the precious metal by more than 4.500 tons in the last decade. In September alone, reserves totaled approximately 36.000 tons, the highest since 1990 and 15% more than in the previous decade.
Gold holdings began to increase around 2009. Until then, central banks and other public institutions typically sold it to increase holdings of assets denominated in US dollars. Given that the United States enjoyed a dynamic economy in the 1990s as the sole superpower after the end of the Cold War, the benefits generated by dollar-denominated assets were attractive to other countries, experts say.
2008 crisis and the exit of the dollar
Experts note that the value of the dollar relative to gold has fallen dramatically over the past decade, as large-scale monetary easing has continued to boost the supply of the US currency. Although the US Federal Reserve (Fed) has made it clear that it is ending its easy money policy and has projected that it will begin raising interest rates in 2022, several central banks, especially in emerging economies, continue to bet on gold, reflecting global concern about the dollar-based monetary regime. Thus, in the first nine months of 2021, Thailand bought about 90 tons of the precious metal, India 70 tons, and Brazil 60 tons.
The 2008 global financial crisis triggered an outflow of funds, even from the United States' public debt, causing a drop in the value of dollar-denominated assets. Confidence in these assets "wavered," said market analyst Itsuo Toyoshima.
Following the crisis, long-term interest rates in the US fell as a result of large-scale monetary easing, making holding assets denominated in US dollars less advantageous. Central banks in emerging economies with low credit capacity began to "protect their assets with gold," explained Koichiro Kamei, a financial and precious metals analyst.
The dollar's share of foreign exchange reserves is decreasing, in contrast to the growth of gold. In 2020, the dollar's share of international reserves fell to its lowest level in a quarter of a century.