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21% of central banks expect to buy gold this year - WGC

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(Kitco News) - Central banks expect gold to continue to play an important role in their reserves, according to the latest research from the World Gold Council (WGC).

Tuesday, the WGC released the results of its fourth annual Central Bank Gold Survey, which noted that 21% of central banks expect to increase their gold reserves within the next year, relatively unchanged from 2020.

The survey also noted that no central bank expects to sell gold this year, down from 4% from last year's survey.

This year a record 56 central banks participated in the WGC's survey, up from 51 in 2020.

"This year's survey continues to highlight significant interest in gold amongst central banks, with the backdrop of the COVID-19 pandemic underscoring the importance of maintaining liquid, uncorrelated assets in a reserve portfolio. Inflation has also resurfaced as an investment consideration and may inform central bank asset allocation in the coming years. We believe that central banks will continue to be net buyers of gold, albeit at somewhat lower volumes than those of the previous decade," the analysts at the WGC said.

Although some central banks are looking to grow their gold reserves this year, the WGC noted that the responses show that officials are unsure of the global trend in holdings.

The WGC said that 52% of respondents believe that global central bank gold holdings will grow in the coming year, down from 75% last year.

While central banks are expected to continue to be net buyers of gold, the WGC said that the motivation behind the purchase had shifted this year. Gold's performance during the crisis was the top reason to hold gold among 79% of survey participants.

"This factor has climbed to the top spot after ranking fourth in 2019 and second in 2020, a progression that may reflect the increasing importance that central banks attach to crisis mitigation and a potential nod to gold's strong performance during the pandemic," the analysts said.

Other reasons why central banks hold gold included its long-term value and its role as a portfolio diversifier.

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