Central Banks Fuel Gold Rally as Reserves Diversification Accelerates

Central banks continue to drive gold prices higher as they diversify their reserves away from traditional currencies. According to ING's analysis, official sector buying has accelerated in recent years and remains a key structural driver for the precious metal.

The report highlights that emerging market central banks, particularly those in Asia and Eastern Europe, are actively buying gold to reduce reliance on the US dollar and hedge against geopolitical and inflationary risks. These institutions have been consistently accumulating gold since the 2008 financial crisis, with purchases remaining well above the ten-year average.

ING's analysts suggest that as long as central banks continue their accumulation, the downside for gold prices may be limited. However, they also caution that a sharp reversal in monetary policy or a sudden improvement in global risk sentiment could temper the rally.