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By Isaac Cohen*
A working paper released by the International Monetary Fund, in January, describes and analyzes recent trends in the utilization of gold as international reserve asset (IMF WP/23/14-pdf).
Recognizing that gold holdings by central banks were “moving slowly downward for the better part of four decades,” the paper identifies a rising trend in gold purchases since the Great Recession of 2008. It also reveals that in the third quarter of 2022 “global central banks added US$20 billion of gold to their international reserves,” adding this is “the largest quarterly increase in official gold demand in fully 55 years,” according to the World Gold Council
Two main factors are identified as contributing to this increasing trend. First, the function of gold as haven in times of global volatility and second, international sanctions imposed by the most advanced economies. For instance, the Bank of Russia increased gold purchases after the annexation of Crimea in 2014, while China maintains less than 5 percent of its reserves in gold.
The paper also identifies a group of central banks characterized as “active diversifiers,” because they have purchased gold and “raised its share in reserves by at least 5 percentage points in the last two decades.” Listed in decreased order by the amount of gold purchased between 1999 and 2021, the largest buyers are all emerging market economies, as follows: Kazakhstan, Belarus, Turkiye, Uzbekistan, Hungary, Iraq, Argentina and Qatar.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.