More rich countries worried about the dollar want to buy gold

Most central banks said they expected the dollar's share of global reserves to fall. new look casting/Getty Images

• Central banks from advanced economies plan to buy more gold, a World Gold Council survey indicates.
• They said they were loading up on gold to hedge against risks such as inflation and economic shocks.
• Most central banks said they expected the US dollar's share in global reserves to fall in the next five years.

Emerging economies, such as China and its allies, have been hoarding gold to diversify from the US dollar.

But they're not the only gold buyers.

Even central banks from advanced economies are planning to load up on gold, a World Gold Council survey released on Monday indicates.

This enthusiasm for the yellow metal has come even though the spot gold price is hovering at record levels, about $2,330 an ounce, after hitting nearly $2,450 last month.

The WGC survey, conducted from February to April, found that 29% of 70 central banks — the biggest share the WGC has observed since 2019 — were planning to buy gold over the next 12 months.

Among the central banks, about 15% of those in advanced economies said they planned to do so — also the most since 2019. Meanwhile, about 40% of emerging-market central banks said they'd be buying in the coming year.

The central banks' key reasons for more gold purchases included rebalancing their reserves and hedging against risks such as rising inflation, US dollar exposure, and market instability. Eight out of the 20 central banks that said they were planning to buy more gold also cited higher economic risks in countries where reserve currencies are from because of issues such as the rising US budget deficit.

In contrast to their enthusiasm for gold, 56% of central banks from advanced economies said they expected the dollar's share of global reserves to fall over the next five years. Nearly two-thirds of central banks from emerging economies expected the same.

Shrinking US dollar reserves

The WGC's annual survey reflects the sentiment of central banks amid intense discussion about the dollar's dominant role as the world's reserve currency.

The discussion has been gaining ground following the West's sweeping sanctions against Russia over its 2022 invasion of Ukraine. Other countries worried that they, too, could be locked out of the US-dollar-based financial system.

But king dollar is so entrenched and pervasive in the world's financial system that very few people think it can be dethroned.

Even so, a group of major emerging countries is now working on a way around the dollar.

And while the dollar is still by far the most dominant currency in the foreign-exchange reserves of the world's central banks, the greenback's share in these reserves — after exchange-rate and interest-rate adjustments — declined from more than 70% in 2000 to about 55% in the last quarter of 2023, according to a recent International Monetary Fund report.

The IMF termed the decline in the US dollar's share of global reserves "stealth erosion."

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