Five charts to start your day
Central banks are buying lots of gold
Central banks are hedging their bets with gold – the oldest currency in the world. This is particularly evident in emerging markets. But what's prompting this move?
Let's delve into the details with this first chart.
Firstly, there are concerns about inflation. Gold enables central banks to protect their reserves from inflation, especially when those reserves consist of fiat currencies.
Then there's the dollar conundrum. Numerous central banks, particularly those in emerging markets, aim to diversify away from the dollar – a strategy influenced by both geopolitical tensions and trade considerations.
Domestic factors also play a part. In China, for example, the central bank's appetite for gold is not only a hedge against international uncertainties but also a response to domestic challenges like a weakening renminbi, a lackluster stock market, and a turbulent real estate sector. Such concerns have prompted both the central bank and Chinese consumers to invest in gold to safeguard their assets.
Central banks around the world are buying huge amounts of gold
Source: The Financial Times
Overall, it is a combination of factors that’s causing this gold buying spree. This includes hedging against inflation, reducing dependency on the US dollar, geopolitical uncertainty and domestic economic challenges. It’s an interesting story and it is worth watching as it develops.
Coming up:
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