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Central banks around the world now account for 23% of the total global gold demand, according to a report by Wells Fargo.
Gold (XAUUSD:CUR) is up 14% year-to-date, closing at new all-time highs on 16 different days. The gold spot price is up 0.57% from the previous day.
Central Bank Influence
Persistent and historically elevated purchases by central banks have been the key driver of gold’s performance, said Analyst Mason Mendez in a Strategy note.
He highlighted that since 2022, central banks have significantly impacted global gold demand. The percentage of demand from central banks has surged from 9% to 23%, with emerging market central banks, particularly China, leading the way in gold purchases.
Reasons for Central Bank Gold Investments
Analyst Mason Mendez pointed out that central banks are turning to gold as a rare reserve asset with no counterparty risk, unlike other assets such as U.S. Treasury yields. National debt levels are rising, leading to concerns about counterparty risk, especially in emerging markets, making gold an attractive option for diversification and protection against devaluation.
Future Trends
Mendez concluded that the ongoing gold purchases by central banks are likely to continue supporting global gold prices. He projected that this trend will persist in the foreseeable future and contribute to Wells Fargo’s target range of $2,300-2,400 per troy ounce by 2024 and $2,400-2,500 per troy ounce by 2025.
