IN-DEMAND WITH CENTRAL BANKS & GOVERNMENTS
While gold no longer plays a direct role in the international monetary system, central banks and governments still hold extensive gold reserves to preserve national wealth and protect against economic instability. Given present macro-economic conditions, central banks are buying gold at an ever-increasing pace with the World Gold Council stating that central banks are more optimistic on gold as a reserve asset in 2022, with 61% of respondents stating that expect global reserves of gold to increase over the forthcoming 12 months.
Central Bank gold purchases
Global Asset Reserves
Today, gold is the third-largest reserve asset globally, after USD and EUR. Moreover, gold is increasingly used as collateral in financial transactions, much like other high quality, liquid assets such as government debt.
MARKET ROBUST AND HIGHLY LIQUID
The gold market is robust and highly liquid, with all indications that it will stay so.
On the futures market, OTC transactions and gold backed exchange trading, daily volumes averaged USD 130 billion in 2021, second only to oil
On the OTC market, estimated volumes are even higher, at around USD 61 billion
There is a thriving physical gold-backed ETF market, with daily volumes averaging USD 1 billion
Overall, average daily trading in the global gold market ranges between USD 100 billion and USD 200 billion a day
HIGH PRICE AND FORECAST
Gold's first breach of the significant USD 2,000 oz price level in mid 2020 was undoubtedly due in large part to economic uncertainty caused by the COVID-19 pandemic. Gold hit its all time high of USD 2,074.60 on March 8th 2022 with the key driving factors being inflationary concerns and the conflict in Ukraine.
The price of gold has since retreated some 10% from these highs due mainly to the strength of the greenback, trading at circa USD 1,780 oz with strong support at USD 1,700. However, the gold price in both EUR and JPY continues to trade at all time highs, and this is expected to continue as market participants hedge against fiat currencies.
Gold performance 1990-2019
More information on gold and silver’s performance can be found on the World Gold Council website.