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Central Banking/Rachael King/November 2020
“This year, the Covid-19 pandemic and the reaction from central banks had a significant impact on the price of gold. Over the past few decades, central banks have viewed gold as a ‘safe-haven asset’ – an investment that can be used to dodge the impact of negative sovereign bond yields and act as a safeguard against inflation. Against the backdrop of the pandemic, gold has rarely appeared more attractive. However, in August, central banks became net gold sellers for the first time in approximately 18 months, highlighting the competing demands on investment strategies.”
USAGOLD note: This pdf document from Central Banking magazine is a compilation of studies linked individually here over the past couple of weeks – a nice package that can be stored for future reference. If I might make a brief comment, central banks store gold for the same reasons as most individual investors – to have as a long-term store of value. That positioning implies using the metal when needed. For some central banks, the pandemic has presented the need for liquidity. This study concludes that nothing has changed among central banks with respect to their long term views of gold. Should stability return, so will the steady additions to aggregate central bank reserves – with a few new parties likely to join the quest given the lessons learned.
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