Against the backdrop of the ever-changing global financial markets, the importance of gold as a safe-haven asset is increasingly highlighted.

On Monday local time, central bank officials from countries such as Mexico, Mongolia, and the Czech Republic rarely made public statements in different settings, openly expressing support for increasing gold reserves, which brought a new signal to the market.

Rare statements from multiple countries support increasing holdings

At the annual industry conference of the London Bullion Market Association held in Miami, central bank officials from these countries expressed their support for increasing gold reserves. They believe that against the backdrop of the current intensification of geopolitical tensions and the decline in interest rates, the proportion of gold in national foreign exchange reserves may continue to increase in the next few years.

Joaquín Tapia, Director of International Reserves at the Bank of Mexico, pointed out:

"Considering the context we are facing now—lower interest rates, tense political situations, the US election, many uncertainties—perhaps the share of gold in our investment portfolio will also increase."

Marek Sestak, Deputy Executive Director of the Risk Management Department of the Czech National Bank, said that gold is seen as a pure reserve diversification tool.

Enkhjin Atarbaatar, head of the Financial Markets Department of the Central Bank of Mongolia, said that the importance of gold as a safe asset to Mongolia's reserves is increasing.

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Central bank officials from these countries also said that they are not currently active in the gold derivatives field. London remains their main gold storage location as a trading center, and only Mongolia has limited interest in repatriating gold for domestic storage.

This statement contrasts sharply with the past practice of central bank officials rarely sending signals to buy gold in advance.The purchasing behavior of central banks has been one of the main driving forces behind the continuous record highs in international gold prices this year. As of 2024, the international gold price has soared by more than 28% and continues to set new historical highs, outperforming the U.S. stock market and bonds.

Safe-haven assets are favored

The impact of central banks' purchasing behavior on gold prices cannot be ignored. According to data from the World Gold Council, in the second quarter of this year, global central banks' net gold purchases increased by 6% year-on-year to 184 tons.

However, due to the continuous rise in gold prices, the net purchases by central banks in August have slowed down to 8 tons. Despite this, the World Gold Council maintains a positive outlook for central bank gold demand for the remainder of 2024, but expects the total demand for central bank gold purchases to be lower than last year.

The actions of central banks to increase their gold reserves reflect the importance of gold as a diversified investment tool and a haven against inflation, international conflicts, and internal unrest in investment portfolios.

Qatar National Bank mentioned in an economic commentary that the relaxation of monetary policy by major central banks, the devaluation of the dollar, and geopolitical tensions will further support gold prices. The bank also pointed out that although global inflation has declined rapidly in recent years, and gold has accumulated a significant increase, the global environment remains favorable for gold.

The appeal of gold is not only in its role as a safe-haven asset but also in its diversification role in investment portfolios. Terrence Keeley, CEO of Impact Evaluation Lab, stated that, according to market valuation, on average, each central bank has 15% of its foreign exchange reserves in precious metals. This proportion shows the important position of gold in the reserves of global central banks.

Against the backdrop of increasing global economic uncertainty, gold, as a tangible, jurisdiction-free asset, can act as collateral in various markets, and its position is becoming increasingly important. Central banks around the world have been accumulating gold at a pace unseen for generations, which supports the long-term stable institutional demand for gold.

According to data from the World Gold Council, global central banks increased their reserve purchases by 6% in the second quarter, to 183 tons, and are expected to reduce purchases by 150 tons for the full year of 2024 starting from 2023. This data shows that although the pace of central bank gold purchases has slowed, the demand for gold remains strong.