Gold Prices Soar Amid Growing Concerns Over Systemic Risk and US Dollar Instability

For decades, gold was regarded as little more than a pet rock in the global financial system. However, this perception is changing rapidly.

The US abandoned the gold standard in 1971 and instead attached the value of the US currency to 'the full faith and credit' of the US government. This led to a significant decline in the importance of gold for central banks and authorities, which were once its biggest owners.

However, with each successive financial crisis, the price of gold has begun to rise. The COVID-19 pandemic and Russia's invasion of Ukraine in 2022 accelerated this trend, as countries such as China began to stockpile gold as a hedge against US dollar-based assets being frozen.

The People's Bank of China has been buying gold for 21 consecutive months, adding a net 20 tonnes in July alone. Central banks globally have cut the share of US dollars in their reserves from 60% to 40%, while increasing their gold holdings correspondingly.