After a decade-low demand in gold purchases in 2020, central banks have been ramping up their purchases, signifying that they are just like many of us individual investors: they increasingly recognize the need to hold gold during periods of crisis and clearly see the writing on the wall. This renewed interest and the significant uptick in demand by central banks is set to support gold prices as we continue on our way through 2021.
Quoting data from the International Monetary Fund, analysts from Commerzbank in Germany noted that quite a few countries, including Thailand, India, Cambodia, Serbia, and Kazakhstan, to name a few, have been increasing their holdings in the first half of 2021, and particularly in Q2.
A recovery in global trade, as well as higher crude prices, have given many of the emerging market nations the opportunity to top up on their gold holdings.
The World Gold Council also recently conducted its annual survey of the world’s central banks, and the findings were very interesting: 21% of world’s central banks intend to increase their gold reserves over the coming 12 months, and two-thirds reported higher reserve levels compared to even just 5 years ago.
The world is slowly recovering from the pandemic, but the return of inflation, as well as an array of other potential risks, will likely translate to higher demand levels, both from individual and institutional investors. Technical analysts are also confident that it is only a matter of time before gold prices climb back above $2,000 per ounce.
Mark Twain is oft quoted as saying “history doesn’t repeat itself, but it often rhymes”. You may remember gold hit its highest price of $2,067.15 an ounce on August 7, 2020.
What kind of rhyme might we expect this August?