(The Asset) - Gold investment jumped 18% to 4,741 tonnes last year, almost on par with 2011 when there was an exceptional demand for investment in the precious metal, a new report finds.
The strong growth could be partly attributed to central banks increasing their gold holdings, using gold as an inflation hedge, according to City Index, using data from the World Gold Council. City Index is a London-based service provider for spread betting, foreign exchange, and CFD (contract for difference) trading.
Demand is also driven by jewellery purchases, industrial use, and retail investment.
Gold reserves in China averaged 1,694.78 tonnes from 2013 until 2021, reaching an all-time high of 2,010.51 tonnes in the fourth quarter of 2022, or 3.6% of its total foreign reserves.
This represents a 90.73% rise from 2013, over four-fifths higher than the increase in Japan’s gold reserves, which grew by just 10.55% to 845.97 tonnes over the past 10 years.
"China's significant increase in gold holdings in the last decade is likely an attempt to diversify its foreign reserves away from the US dollar, a move that is consistent with its broader strategic goals,” says Matt Weller, head of market research at City Index.
“This trend is part of a larger global shift in which countries are increasingly looking to reduce their reliance on the US dollar, and we expect this trend to continue as geopolitical tensions persist."
Thailand registered the second-largest growth in gold reserves in the ranking over the last decade, up 60.2% to 244.16 tonnes in 2022.
On the other hand, Indonesia’s gold holdings inched up by a mere 0.64% to 78.57 tonnes during the period, despite the two Southeast Asian countries showing similarities on several metrics, such as in the level of exported goods.
In Thailand, gold remains popular as an inflation hedge amid rising economic uncertainties. Demand for the precious metal in the country rose 40% year-on-year, fuelled by the rebound in tourism, according to the World Gold Council.
Singapore saw its gold holdings rise 20.68% to 153.74 tonnes over the past 10 years. South Korea chose to increase its gold reserves by marginal amounts, up 0.01% during the period, while Taiwan and Hong Kong did not add to their holdings at all.
The Philippines is the only country in the ranking that has reduced its gold reserves, shifting instead from passively holding gold to actively trading it, City Index says.
Weller notes: "The surge in gold investment demand signals a growing concern among investors regarding the inflationary pressures in the market, prompting individuals to seek a reliable measure of protection against purchasing power risk. As central banks continue to use gold as an inflation hedge, it's not surprising to see individual investors following suit in the form of coins or jewellery, especially in countries such as India and China, where gold has long been considered a traditional store of value."
By The Asset
May 4, 2023
