Central Banks Hoard Record Amount of Gold Amid Global Economic Uncertainty

Gold has been a widely used store of value and medium of exchange throughout human history. The precious metal is currently viewed as a safe-haven asset, making it a good investment during turbulent times. Gold also serves as a hedge against inflation and depreciating currencies because it doesn't rely on any specific issuer or government.

Central banks are the largest holders of gold. To support their currencies in difficult times, central banks diversify their reserves by buying gold to improve the perceived strength of the economy and currency. High gold reserves can boost a country's solvency. In 2022, central banks added 1,136 tonnes of gold worth approximately $70 billion to their reserves, according to data from the World Gold Council. This is the highest yearly purchase since records began.

The price of gold has an inverse correlation with the US Dollar and US Treasuries, both major reserve and safe-haven assets. When the dollar depreciates, gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets, meaning that a rally in the stock market typically weakens the price of gold, while sell-offs in riskier markets favor the precious metal.