Everyone Wants Gold: ETFs and Central Banks Can’t Get Enough
Gold now makes up 30% of global reserves, Deutsche Bank says.
Gold is having a monster year. Prices have smashed through record highs above $4,300 an ounce, sending ETFs like the SPDR Gold Shares (GLD) up more than 60%. Investors have poured $67.7 billion into global gold ETFs so far this year, the biggest annual haul ever, according to the World Gold Council.
But ETF buyers aren’t the only ones devouring gold. Central banks from China and Turkey to Poland have been hoarding the metal for years, building up reserves as they diversify away from the U.S. dollar.
Deutsche Bank research analyst Michael Hsueh said Friday that gold now makes up about 30% of global foreign exchange reserves, up from 24% at the end of June. The dollar’s share has slipped from 43% to 40% in the same period.
Some of that rise reflects continued buying, but most of it comes down to price. Hsueh estimates that if gold climbs another third to around $5,790 an ounce, gold and dollar holdings would each make up about 36% of global reserves, assuming no new gold purchases.
It’s a remarkable shift. In just seven years, gold’s share of central bank reserves has nearly tripled, reestablishing it as one of the world’s most important reserve assets.
