A century of history of gold purchases by global central banks: the current level is still far from the level of 1990

A century of history of global central bank gold purchases: The current level is still far from the level of 1990. Huatai Securities Yi Long, Li Bin and other Huatai Securities pointed out that although global central bank gold purchases increased after 2008 and accelerated significantly after 2022, however, in the long run From a cyclical perspective, gold’s proportion of global reserves is still at a historical low

A century of history of global central bank gold purchases: The current level is still far from the level of 1990. Huatai Securities Yi Long, Li Bin and others pointed out that although global central bank gold purchases increased after 2008 and accelerated significantly after 2022, however, in the long run Analysis from a cyclical perspective. The proportion of gold in global reserves is still at a historical low.
Even if gold reserves continue to increase at the rate since 2022, the proportion of gold in central bank reserves will still take more than ten years to climb back to the level of 1990.
This article provides an in-depth analysis of the evolution of the total and distribution of global central bank reserve assets after 1880, and focuses on the changes in the trend of central bank gold purchases over the past 50 years to explore the possible duration of this round of central bank gold purchases and its impact on gold prices.
Although the central bank\’s gold purchases increased after 2008 and accelerated significantly after 2022, however, from a long-term perspective, the proportion of gold in global reserves is still at a historical low.
Even if gold reserves continue to increase at the rate since 2022, the proportion of gold in central bank reserves will still take more than ten years to climb back to the level of 1990.
The central bank\’s gold purchase structurally supports the demand for gold, and the supply of gold has entered a bottleneck period. This means that the price of gold may still have considerable room to rise.
1. The century-old history of central bank gold reserves: The current proportion of gold reserves is at a low level. Over the past century and a half, the proportion of gold in global central bank reserve assets has declined overall. The global financial crisis rebounded in 2008, especially in emerging market countries.
In order to maintain the balance of international payments, respond to international financial crises, and promote international trade and investment, the central bank will hold reserve assets including gold.
As of February this year, the total scale of global reserve assets was US$15.3 trillion, of which gold was US$2.3 trillion, accounting for 15% based on market price.
Under the gold standard monetary system before World War II, the proportion of gold in reserve assets remained close to 90%; in 1990, gold accounted for 34% of global reserves. Since then, globalization has accelerated. This proportion dropped to a historical low of 10% in 2008. ; and then gradually recovered.
2. The amount of gold purchased by emerging markets will more than double after 2022. Dominant changes in gold demand After the global financial crisis, central banks in emerging markets began to increase their gold holdings. This process accelerated significantly after 2022. The proportion of central bank gold purchases in global gold demand has since increased. It jumped from about 10% to a quarter, driving other investment needs and becoming the dominant force in changes in non-consumer gold demand.
From 2009 to 2023, the gold reserves of developed countries only increased by 1.1% to 22,000 tons. However, the cumulative growth of emerging market economies increased by 97% to 11,000 tons.
The largest marginal buyers were Russia (contributing 31% to the growth of global central bank gold reserves during the same period), China (contributing 22%), Turkey (10%), Uzbekistan (6.9%), Poland (4.7%) and India (4.5%).
After the outbreak of the Russia-Ukraine conflict, the pace of various countries increasing their gold holdings accelerated significantly.
The central bank\’s annual gold purchase demand from 2022 to 2023 will be about 1,000 tons. This is more than double the average annual gold purchase volume in the previous five years. It will mainly be contributed by the above emerging market countries.
As a result, the proportion of central bank gold purchases in gold demand jumped from 11% to 25%.
The central bank\’s demand for gold purchases has increased structurally, explaining the super resilience of gold prices during the sharp rise in global real interest rates in 2022-23.
3. There is a long way to go for central banks to increase their gold holdings. Gold prices have strong long-term support. There is still a lot of room for central banks to increase their gold holdings. And considering that gold production has reached a bottleneck, gold prices have structural support in the medium to long term.
Considering that gold only accounts for 8% of reserve assets in emerging markets, and its proportion is less than average in countries with large reserve assets such as India, Saudi Arabia, and China, emerging market economies still have a lot of room to increase their holdings.
Extrapolating based on the average recovery speed of gold in reserve assets from 2019 to 2023. If gold demand returns to the historical median level of 34% in 1990, global central banks may continue to increase their gold holdings until 2045. And the corresponding The annual gold purchase amount is 1,400 tons-1,900 tons, accounting for approximately 28%-39% of the total demand in 2023. It is significantly higher than the average level of 11% from 2017 to 2021.
It is true that different assumptions can be made about the speed and time span. But this order of magnitude cannot be ignored.
At the same time, the growth of global gold production has basically stagnated. The compound growth rate from 2018 to 2023 dropped to -0.1%.
The golden configuration allows you to advance and attack, and retreat to defend.
Given that the period in which the risk premium brought about by U.S. fiscal expansion pushed up real interest rates (R*) the fastest has passed, the headwinds for gold prices are no longer this year. Structural factors may dominate, and cyclical factors may also further add to gold’s upward trend— —If inflation is highly sticky, gold\’s anti-inflation properties can be hedged accordingly; and if interest rates fall, gold is also expected to benefit. See \”How to understand the recent changes in gold, oil, and U.S. bond prices?\” 》(2024/4/10).
Contents 1. Review of the 100-year history of central bank gold reserves 2. After 2008, emerging markets have been the main force in global central banks’ increase in gold holdings. After the Russia-Ukraine conflict, the speed more than doubled Rising interest rates are headwinds 4. The central bank has a long way to go in purchasing gold; gold allocation has entered a tailwind stage. Text 1. Reviewing the century-old history of the central bank’s gold reserves. In order to maintain the balance of international payments, respond to international financial crises, and promote international trade and investment, the central bank will maintain There are reserve assets including gold.
Gold is a traditional international reserve asset. At the beginning of the 20th century, it was once the most important reserve asset.
In addition to gold, central bank reserve assets also include foreign exchange reserves, IMF reserve positions, Special Drawing Rights (SDR) and other reserve assets.
Foreign exchange reserves refer to external assets controlled by the monetary authorities and available for use at any time. They include currency, bank deposits, securities, etc.
The Fund\’s reserve position refers to the net reserve assets of member countries towards the International Monetary Fund (IMF). It reflects the creditor\’s rights or debts of member countries towards the Fund.
The Special Drawing Rights (SDR) is an international reserve asset. It is issued by the IMF. Its value is determined by a basket of major international currencies.
Other reserve assets include some specific foreign assets. For example, some countries invest part of their foreign exchange reserves in commodities or real estate.
As of February 2024, the total size of global reserve assets is US$15.3 trillion. Among them, foreign exchange reserves are currently the most important part of central bank reserve assets. The total size is US$12.2 trillion, accounting for 78%. According to IMF data. In the fourth quarter of 2023, the US dollar and the euro accounted for 58.4% and 20.0% respectively. The RMB accounted for 2.3% (Charts 1 and 2).
Gold is the third largest reserve asset in the world, with a scale of US$2.3 trillion, second only to the US dollar and the euro, accounting for 15% (Chart 3); SDR is US$0.9 trillion, accounting for 6%; IMF reserve position and other reserve assets totaled 0.2 trillion US dollars. The proportions were 1% and 0.2% respectively.
In the past century and a half, the ratio of central bank reserve assets to GDP has reached two highs. They were 11.7% before World War II and 17% in 2020 (Chart 4). The main driving factor behind this is economic and financial globalization. process.
Specifically, from 1880 to before World War II, the ratio of central bank reserve assets to GDP continued to rise as a whole, from 1.2% to 11.7%.
From the perspective of demand, during this period, many countries around the world established the gold standard system. Currency issuance was linked to the price of gold, which increased the demand for gold reserves.
From the perspective of supply, a large number of gold mines were discovered in the Americas, Southern Africa and Australia. Global gold supply increased significantly during this period (Chart 5).
In addition, with the outbreak of the Industrial Revolution, labor productivity and cross-border trade barriers fell in various countries. The superimposed gold standard system reduced exchange rate fluctuations. There was widespread trade liberalization and free flow of capital in various countries. This is also called the first globalization: globalization The ratio of trade to GDP continues to rise.
In order to deal with international balance of payments and capital flow risks, central banks objectively need to hold more reserve assets.
After World War II and before the disintegration of the Bretton Woods system in 1971, the ratio of global reserve assets to GDP continued to fall, from 12% to about 3%.
After World War II, the Bretton Woods system was established. The U.S. dollar was pegged to gold. The exchange rates of various countries were pegged to the U.S. dollar. Strict capital controls were implemented.
Under the Bretton Woods system, although global trade developed rapidly, due to relatively strict capital controls, the scale of cross-border capital flows was small, and there was no obvious imbalance in the economies of various countries. The demand for reserve assets in various countries declined, resulting in reserve assets accounting for one-third of global GDP. Lower than overall.
For example, from 1960 to 1971, the ratio of the U.S. current account to GDP averaged 0.4%. There was no obvious imbalance (Chart 6).
After the disintegration of the Bretton Woods system, the ratio of reserve assets to GDP continued to rise, reaching a maximum of 17% of GDP.
The disintegration of the Bretton Woods system and the superposition of economic and financial globalization since the 1980s. Countries are facing greater external shocks, capital flow shocks and exchange rate shocks. The central bank\’s motivation for precautionary savings has increased, which has promoted the continued recovery of the scale of foreign exchange reserves.
Especially after the Asian financial crisis in 1997, many emerging market economies accelerated the accumulation of reserve assets.
After the global financial crisis in 2008, the ratio of reserve assets to global GDP remained at a high level.
In recent years, high global inflation has pushed up nominal GDP, leading to a marginal decline in the proportion of reserve assets.
The overall proportion of gold in central bank reserve assets continues to decline. However, it has experienced three main stages.
The establishment of the gold standard before World War II maintained gold\’s proportion in reserve assets at 90%.
After World War II and before the disintegration of the Bretton Woods system, although the absolute amount of central bank gold reserves increased, the growth rate of other reserve assets such as foreign exchange reserves exceeded that of gold, causing the proportion of gold to fall to 37% in 1971.
After the disintegration of the Bretton Woods system, the reduction of gold holdings by developed countries and the substantial increase in foreign exchange reserves caused the proportion of gold to fall to a historical low of about 10% in 2008. It has since gradually recovered, reaching about 15% in 2023 (Chart 7).
Specifically, the establishment of the gold standard before World War II maintained the proportion of gold in reserve assets at 90%.
From the 1870s to World War I, many countries around the world established the gold standard system. Central banks used gold reserves to support their national currencies.
However, due to the limited production of gold and the high cost of mining and holding, the gold standard went through the transformation of gold coin standard→gold nugget standard→gold exchange standard. In the second half of the 19th century, the gold exchange standard was officially established. That is, Gold and foreign exchange jointly serve as the support for local currency credit[1]. This led to the rapid growth of foreign exchange reserves at the end of the 19th century and the beginning of the 20th century. However, gold was still the most important reserve asset during this period. Its proportion in reserve assets was generally More than 90.
For example, from the late 1880s to 1913, the foreign exchange assets held by 18 major note-issuing banks and the Ministry of Finance in the United States and Europe increased by more than 8 times, while gold only increased by 5 times.
Although the absolute level of foreign exchange has grown rapidly, in terms of proportion, foreign exchange reserves only increased from less than 10% in 1880 to nearly 15% in 1913. Gold is still the most important reserve asset (Eichengreen et al. 2019).
After World War II and before the disintegration of the Bretton Woods system, although the absolute quantity of central bank gold reserves increased, other reserve assets grew faster than gold, causing the proportion of gold to fall to 37% in 1971.
The Bretton Woods system established after World War II allowed gold to once again play a key role in the world financial system. The U.S. dollar is linked to gold, while other currencies are either linked to the U.S. dollar or directly linked to gold.
Judging from the absolute amount of central bank gold reserves, the total gold reserves continued to rise from 1950 to 1971, with a cumulative increase of 18%. The compound growth rate was only 0.8% (Chart 9).
Other reserve assets grew faster. For example, from 1950 to 1971, reserve assets other than gold increased by 526% cumulatively. The compound growth rate was 9.1%.
This resulted in a continued decline in gold\’s share of reserve assets: from 1950 to 1971, gold\’s share dropped from 72% to 37% (Chart 7).
After the disintegration of the Bretton Woods system, the proportion of gold in reserve assets continued to decline. It rebounded after 2008 and will reach about 15% in 2023.
After the disintegration of the Bretton Woods system in 1971, the central banks of developed countries continued to reduce their gold holdings, and accelerated the reduction during the Great Moderation period. As a result, the proportion of global gold in reserves fell to about 10% in 2008 (Chart 7).
The World Gold Council pointed out that the accelerated reduction of gold holdings by the central banks of developed countries during this period may be due to the significant decline in the safe-haven demand for gold during the Great Moderation. In addition, the exchange rates of developed countries have turned to floating, and the return requirements for reserve assets have increased. Other reserve assets The advantage over gold has increased, causing gold to be reduced by central banks in developed countries.
After 2008, central banks of various countries purchased more gold than sold gold, especially in emerging market economies (Chart 10). The proportion of gold in reserve assets has rebounded, reaching 15% in 2023.
According to research by the IMF (2023)[2]. After 2008, emerging market economies have become more active in diversifying their reserve assets by investing in gold.
There may be two reasons behind this. One is that when the returns on other financial assets are low, gold can be used by central banks to hedge against economic, financial and geopolitical fluctuations.
Second, the financial sanctions imposed by the major reserve-issuing economies—the United States, the United Kingdom, the European Union, and Japan—have prompted some central banks to increase their gold holdings.
2. After 2008, emerging markets were the main force for global central banks to increase their gold holdings. After the Russia-Ukraine conflict, the speed more than doubled. After the global financial crisis, emerging market central banks began to increase their gold holdings. This process will accelerate significantly after 2022. Central bank gold purchases accounted for The proportion of global gold demand has jumped to a quarter from about 10% before. However, the proportion of gold in the reserve assets of emerging market economies is still lower than that of developed economies. There is still much room for increasing holdings in the future.
From 2009 to 2023, the official gold reserve holdings increased by 18% (5421 tons) to 36,000 tons. Among them, the gold reserves of developed countries only increased by 1.1% to 22,000 tons. However, the cumulative growth of emerging market economies increased by 97% to 11,000 tons. Ton.
The largest marginal buyers were Russia (contributing 31% to the growth of global central bank gold reserves during the same period), China (contributing 22%), Turkey (10%), Uzbekistan (6.9%), Poland (4.7%) and India (4.5%).
The biggest sellers are the IMF and Germany (Chart 14).
In terms of stocks, the central banks of developed economies hold 60% of gold reserves. The central banks of emerging market countries have doubled their share to 30%. International organizations such as BIS hold the remaining 10%.
As of the fourth quarter of 2023, the total official gold reserves reached 36,000 tons (1.16 billion ounces), accounting for approximately 17% of the gold stock.
Among them, developed economies hold 60%. The United States and Eurozone member states hold more than half of official gold reserves (Chart 13).
Emerging market economies hold 30%, which is significantly higher than the 15% share in 2005. Russia, China, India and Turkey are the largest holders (Chart 13).
International organizations hold about one-tenth (Chart 11).
Judging from the proportion of gold in reserve assets, emerging market economies are still lower than developed economies.
As of the fourth quarter of 2023, the average proportion of global central bank gold in gold reserves is 15%. However, the proportion of gold in reserve assets in developed economies is higher than that in emerging market economies.
On average, gold accounts for 14% of official reserves in advanced economies (down from 70% in 1950) and 8% of official reserves in emerging market economies (down from 30% in 1950) (Chart 12).
In addition, there are large differences in the proportion of gold reserves between countries: as of the end of 2023, the gold of Portugal, Uzbekistan, the United States, Germany, France, and Italy accounted for more than 60% of the reserves (Chart 13). The Netherlands, Kazakhstan, and Lebanon Gold accounts for more than 50% of reserves. For the Eurozone (including the European Central Bank), as of the end of 2021, gold accounts for 53% of official reserves.
Developed countries with relatively low gold reserves in the total reserves of their central banks include the United Kingdom (12%), Switzerland (8%), and Japan (4%). Emerging market countries with relatively low proportions include India (9%) and Saudi Arabia (5%). ) and China (4%).
Improving portfolio returns and coping with geopolitical risks are the main motivations for emerging market economies to increase their gold reserves.
On the one hand, adding a certain amount of gold to reserve assets can improve the return of the portfolio. Before the epidemic, low interest rates in developed countries around the world further increased the appeal of gold.
Gold is a non-interest-bearing asset. The decline in bond interest rates has helped to increase the marginal attractiveness of gold. After the financial crisis, policy interest rates in developed countries have remained low for a long time, driving the long-term interest rate center to continue to move downward, boosting the performance of gold (Chart 15) .
In addition, in the context of the diversification of foreign exchange reserves by global central banks after 2015, gold\’s attributes such as risk resistance, low price volatility, and low correlation with other types of assets have also been further favored by central banks.
On the other hand, geopolitical risks such as sanctions stimulate central banks to increase gold reserves.
Of the 10 largest annual increases in the share of gold reserves since 1999, half occurred when the country concerned was subject to sanctions in the same year or two years prior (Chart 16).
For example, in 2014, Russia was sanctioned by the United States and Europe because of Crimea. In order to ensure the safety of reserve assets, Russia accelerated the increase in the proportion of gold in reserve assets. It increased from 7.9% in 2013 to 25.9% in 2023. At the same time, it reduced its reserves. The proportion of U.S. dollar assets in assets. Increase the proportion of Euro and RMB assets. RMB\’s share of Russia\’s foreign reserve assets has risen to 17.1% in 2021, exceeding 10.9% of U.S. dollar assets (Chart 18).
Central banks of various countries mainly purchase gold through the over-the-counter market.
In transactions in the global gold market, the OTC market accounted for 54% of the total trading volume in March 2023. Among them, the London LBMA accounted for 41%. The futures market accounted for 45% of the total trading volume. The gold ETF accounted for only 1.1% (chart 19).
According to a survey of major central banks, 56% of central banks in emerging market countries will purchase gold in the OTC market, while 29% rely on their home markets.
After the Russia-Ukraine conflict in 2022, the pace of countries increasing their gold holdings has significantly accelerated.
According to data from the World Gold Council, central banks of various countries will increase their purchases of gold after the outbreak of the Russia-Ukraine conflict in 2022.
The central bank\’s annual gold purchase demand from 2022 to 2023 will be about 1,000 tons, with contributions from major emerging market countries. However, the average gold purchase demand from 2017 to 2021 is only 469 tons, nearly doubling (Chart 21).
As a result, the proportion of central bank gold purchases in gold demand jumped from 11% to 25% (Chart 22).
Looking forward. According to the World Bank\’s survey of reserve managers, the proportion of central banks preparing to increase gold reserves in 2024 is 71%. This is higher than 61% in 2022[3] (Chart 23).
3. The central bank purchased a large amount of gold. The price of gold was able to withstand the headwinds of rising real interest rates in 2022-23. As we have discussed before, after 2000, the financial properties of gold increased. Real interest rates became the most important determinant of gold prices (see \” The macro logic of rising gold prices”.2023/10/25).
1970 to before 2000. Inflation expectations and hedging demand are the main determinants of gold prices: 1970-2000 inflation expectations and hedging demand have a good correlation with the actual gold price (using the US CPI price index) (chart 24-Chart 25).
However, after 2000, with the launch of gold ETFs and the expansion of the gold-related derivatives market, the financial attributes of gold were further enhanced.
Real interest rates were the dominant factor in gold prices during this period. There was an obvious negative correlation between the two (Chart 26).
However, due to the structural increase in central bank gold purchases, gold prices will be able to withstand the headwinds of rising real interest rates in 2022-23.
The gold price from 2018 to 2021 can be better explained by the real interest rate and the US dollar index (Chart 27). On average, the real interest rate fell by 1bp and the gold price increased by US$3.2.
However, since 2022, the relationship between gold prices and real interest rates has diverged (Chart 28).
This is mainly because the central bank\’s continued gold purchases from 2022 to 2023 have impacted the relationship between gold and real interest rates, allowing gold prices to resist increases in real interest rates.
In addition, factors such as the Russia-Ukraine conflict and the Palestinian-Israeli conflict have led to an increase in global geopolitical risks. This has also pushed up to a certain extent the geopolitical risk premium implicit in commodities such as gold and crude oil (Chart 29).
4. The central bank’s gold purchase has a long way to go; gold allocation has entered a tailwind stage. From the perspective of medium and long-term demand, the central bank’s gold purchase still has a lot of room for improvement in the future. And it may drive gold investment demand by pushing up the gold price. Superimposed on the global gold output. Bottleneck period. It is expected that gold prices will still have support in the medium to long term.
Investment demand has been the main driver of gold demand in the past two decades. The importance of central bank gold purchases has increased significantly in recent years, especially after 2022.
According to the different holding purposes of gold, gold demand can be divided into four categories: jewelry, technology, investment and central bank gold purchase.
Among them, the demand for jewelry has experienced two stages in the past four decades: high economic growth + low gold prices → substantial growth in jewelry demand, and economic slowdown + high gold prices → falling jewelry demand. The average ratio of jewelry demand to total demand from 2021 to 2023 is 46%.
The proportion of technology demand has not changed much. It has continued to decline in recent years. The proportion of technology demand has dropped from 11% in 2010 to 7% in 2023.
Investment demand has traditionally included gold bars and gold coins. The establishment of gold ETFs in the early 2000s drove gold investment demand to rise.
According to data from the World Gold Council, global gold investment demand was only 535 tons in 1996, accounting for only 15.3% of the total gold demand. The average over the past ten years was 28%, becoming the core factor in changes in gold demand.
The importance of central bank gold purchases continues to increase. The proportion of central bank gold purchases in total demand has increased from an average of 12% in 2010-2019 to an average of 25% in 2022-2023.
It is expected that the central bank will continue to increase its holdings of gold. There is still much room for improvement.
At present, global geopolitical risks are still high. Risk aversion may push the central bank to continue to increase its gold holdings.
From January to March 2023, the global geopolitical risk index is at a high level (Chart 31).
According to research by the IMF (2023) [4], a 1 percentage point increase in geopolitical risks will lag the increase in gold’s share by about 1.5 percentage points.
In the short term, there is still great uncertainty in the geopolitical game between China and the United States, the conflict between Russia and Ukraine, the conflict between Palestine and Israel, and the US election in November. Gold can help hedge geopolitical risks.
In addition, the freeze on Russia\’s foreign exchange reserves by the United States, Europe, and Japan may accelerate the global de-dollarization process, which will benefit emerging market economies\’ gold purchases.
The de-dollarization process in emerging market countries has accelerated since 2022. Many countries have enabled non-US dollar currency settlement in trade and energy. For example, Brazil and China trade in local currencies, India and Malaysia settle in Indian rupees, and Turkey uses rubles to settle Russian natural gas. .may accelerate the process of switching from U.S. dollars to gold reserves.
Finally, emerging market economies still have plenty of room to increase their gold reserves.
Gold accounts for only 8% of reserve assets in emerging markets, which is lower than that of developed countries. It is also far lower than at the end of World War II. However, the proportion of gold in major reserve assets countries such as India, Saudi Arabia, and China is lower than the average level.
Considering that the current proportion of gold in the reserve assets of global countries/international organizations is still at a historically low level (15.2% in 2023). If around 2045 (assuming that the proportion of gold in reserves increases at the rate from 2019 to the present), it can be The level has returned to near the historical midpoint (34% in 1990). This means that the central bank’s annual gold purchase will reach 1,400 tons-1,900 tons, accounting for approximately 28%-39% of the total gold supply in 2023. Significantly higher at an average of 11% from 2017 to 2021 (Chart 32).
In addition, the central bank\’s gold purchases may push up gold prices, which may lag behind the investment demand for gold.
Investment demand for gold includes physical gold (gold bars/coins, etc.) and gold ETFs. Its demand lags the price of gold (Charts 33 and 34).
If the central bank\’s large-scale gold purchases push gold prices to $3,000-3,500, physical gold investment demand may rise from about 1,200 tons in 2023 to 2,100 tons-2,400 tons in 2045. The average annual compound growth rate is 2.6%-3.2% .Significantly higher than -0.1% from 2010 to 2023. The total size of gold ETFs may grow from 2,700 tons in 2023 to 4,600-5,300 tons in 2045. The average annual compound growth rate is 2.5%-3.2%. Higher than 1.8% from 2010 to 2023.
From a supply perspective, global gold production has entered a bottleneck period.
The influencing factors of global gold production mainly include gold mine exploration, gold price and progress in production technology.
From 1900 to the present, gold production has gone through five complete cycles. Among them, the discovery and mining of world-class gold mines such as Muruntau in Uzbekistan, South Deep in South Africa, and Grasberg in Indonesia promoted the rapid growth of gold production in the 1950s-1970s and 1980s-1990s. Growth. The rise in gold prices and advancements in mining technology are the main driving factors for the 2000s-2010s cycle.
Looking at the long-term cycle, according to USGS and World Gold Association data, global annual gold production has increased from 386 tons in 1900 to 3,644 tons in 2023. The compound growth rate is 1.8%.
In recent years, global gold production has entered a bottleneck period. The compound growth rate from 2018 to 2023 is only -0.1% (Chart 36). The overall level remains at around 3,600 tons, which continues to be lower than gold demand (4,450 tons in 2023).
On the whole, we maintain our judgment that precious metals can advance and defend this year.
For example, in \”How to understand the recent changes in gold, oil, and U.S. bond prices?\” \”(2024/4/10) pointed out that although the real interest rate in the United States is currently at a historically high level, the period during which large-scale fiscal stimulus pushed up the real interest rate (R*) the fastest during the epidemic has passed.
Therefore, after resisting the rise in real interest rates, gold’s headwinds may no longer be there this year.
Looking forward, since the current rise in nominal interest rates is often driven by rising inflation expectations (such as this round), gold\’s anti-inflation properties can hedge against the negative impact of such increases in nominal interest rates on non-coupon assets; if interest rates fall. Gold is also expected to benefit.
In addition, as a year with intensive global elections and election changes, coupled with many geopolitical uncertainties in Europe and the Middle East, the demand for alternative asset allocation has increased significantly this year, with outstanding performance.
Gold can be used as an alternative asset allocation to hedge related uncertainties in the US election year. Its price may be supported by related demand.
Author of this article: Yi Long, Li Bin, Hu Lipeng, Qi Bocheng. Source: Huatai Ruisi. Original title: \”A Centenary History of Global Central Banks’ Gold Purchases – A Long Way to Go\” 97 Risk warning and disclaimer Terms: The market is risky. Invest with caution.
This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users.
Users should consider whether any opinions, views or conclusions in this article are appropriate to their particular circumstances.
Invest accordingly and do so at your own risk.

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