There is much uncertainty in the global economy at the moment. Falling stock markets, the conflict between Italy and the European Union, the struggles with Brexit, and the ongoing aggressive policies in the USA seem to be supporting demand for gold as a safe-haven.
Countries around the globe seem to be turning to gold again. The Russian central bank recently announced another increase in its gold reserves – reportedly adding 1.2 million troy ounces. This totals almost 200 tonnes of gold added to the Russian reserves so far this year – a massive acceleration compared to the last few years.
The start of this year, India imported less gold than usual, but ramped up it’s buying in the late summer importing more than double the amount they imported the same time last year.
Following a similar move by Poland, Hungary’s central bank recently increased its gold reserves ten-fold. China, Turkey and Saudi Arabia are also hoarding gold.
Why Turn to Gold?
So, why are these countries turning to gold?
Some countries are looking for an alternative to the dollar due to recent aggressive US trade policy, and a lack of trust in Donald Trump’s presidency. The global financial system is dominated by the US dollar, and there are signs that this could possibly collapse due to the many recent increases in interest rates, as well as trade wars. Geopolitical tension in Yemen, Iraq and Syria are also of major concern.
The current problems within Europe are also having an impact. Some fear that the EU may not have a bright future if too many of the member states, Hungary and Poland for example, diverge from the rules and policies and fall out with the EU hierarchy. The conflict with Italy concerning the Italian draft budget is escalating. Also, a deal is yet to be settled between the UK and the EU concerning Brexit, which may well have a major adverse effect on the economy.
In times of market turmoil, the world often embraces gold.
These increases in central bank reserves are an important element in demand for our favourite precious metal. Long term prospects appear to be looking increasingly positive for gold.
Gold is becoming cool again.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.