Central banks want more gold

The World Gold Council (WGC) has published its Central Bank Reserves Survey for 2026. It carries good news for gold but less good for the current international reserve fiat currency, the Dollar.

This survey has been going for nearly a decade. This year it drew responses from 76 central banks - the highest number since the survey started. It was carried out between early February and mid-May, when the gold price was more volatile than for some time. Between those dates it ranged between $5,300/oz and $4,500/oz. That volatility did not bother the central banks - the survey says that a record 45% expect their own gold holdings to rise this year. Perhaps most interesting was the finding that 84% of respondents believe gold will have a higher share of total reserves five years from now, 8% more than last year. That view was held fairly broadly, between the central banks of both advanced and emerging economies.

A majority of central banks see the US Dollar's share of global reserves falling over the next five years. That would extend a recent trend. The Dollar's share of central bank reserves has dropped from around 70% at the start of this millennium to about 56% last year. Gold's share of such reserves has more than doubled since 2015, but the increase is due to the price rise as much as the accumulation of more tonnage.

Slowly

Is the Dollar slipping from its position as the world's most sought-after fiat currency? Not necessarily.

Before the Dollar became top dog, the Pound was the dominant reserve. Ending the Pound's superiority took a long time. Roughly 50 years, two world wars, the end of the British Empire and, most important, the rise of a clear rival. There is no credible challenger to the Dollar today. The Euro is without unified safety, and China's Renminbi has seen a decline in its share of reserves. The Renminbi has limited convertibility and a managed exchange rate. Central banks cannot easily accumulate it.

That doesn't mean the Dollar is sacrosanct. Several factors are undermining its predominance. The most threatening came with the Ukraine war. As much as $300 billion Russian foreign exchange reserves were frozen by a coalition of G7 countries, and perhaps $100 billion of Iranian funds have been frozen by decades of sanctions. Every central bank now knows Dollar assets are not politically neutral.

But for now the Dollar's decline is happening rather like the speed at which glaciers are melting in Switzerland. The pace is gradual.

Gold reducing not eliminating the Dollar

According to the WGC, 93% of the survey's respondents already hold gold, 12% more than last year. The reasons why central banks hold their gold carry some lessons for private investors. A record 90% cited its performance in times of crisis. It's seen by the majority as a useful hedge against geopolitical risks. It's also prized as a long-term store of value, and for its portfolio diversification. The key investment objectives for central banks, says the WGC, are "safety, liquidity and return characteristics".

Investors are no different to central banks. They need assets that do not default, assets that can be accessed without being forced to sell at a bad time, and assets that protect purchasing power.

Central banks share one critical aim - to protect purchasing power across generations. Over the past four years central banks have bought an average of 1,000 tonnes of gold, annually. That's double the buying seen in the preceding decade. It's not gold that has changed. The context today - for gold, for fiat currencies - is radically different from a decade ago.

Glint shares that mission, the protection of purchasing power. Unlike central banks, however, Glint allows you to use your gold - held safely in a Zurich vault and allocated to you - as money, paying for your daily needs. If you want to protect your purchasing power you need Glint and gold.

For UK clients: At Glint, we make every effort to demonstrate a balanced conversation between gold, silver, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

For US clients: Graphic representations of value are for illustrative purposes only. The Glint debt card is issued by Sutton Bank, member FDIC. The sale, purchase and storage of precious metals are offered by Glint and not Sutton Bank. Your investment in precious metals through Glint is

·        Not insured by the FDIC.

·        Not a deposit or other obligation of, or guaranteed by, Sutton Bank.

·        Subject to investment risks, including the possible risk of loss of the principal amount invested.

All investments involve risk, including possible loss of principal. The value of precious metals is affected by many economic factors, including but not limited to the current market price, demand, perceived scarcity, and quality of the precious metal. Precious metals can increase or decrease in value. Past performance is not a guarantee of future results. As such, investing in precious metals may not be suitable for everyone.