Gold Prices Soar Amid Global Economic Uncertainty

Gold has become increasingly relevant in recent years as central banks and authorities seek to diversify their reserves. For decades, gold was seen as a novelty rather than a necessity after the US abandoned the gold standard in 1971.

The share of gold in worldwide official reserves fell from an average of 50% in the 1970s to around 10% early this century. However, with the global financial crisis in 2008-09 and COVID, gold began to regain its importance.

Following Russia's invasion of Ukraine in 2022, central banks globally cut their share of US dollars in reserves from 60% to 40%, while stockpiling gold instead. The People's Bank of China has been buying gold for a record 21 consecutive months, adding 20 tonnes in July alone.

The value of gold held by the world's central banks has now overtaken that of their holdings of US Treasury bonds, according to the European Central Bank. This shift is attributed to the 'return of history', with geopolitics rather than economics driving the realignment.