Will Banks Buy Gold to Diversify Your Assets

Some banks are starting to buy gold as a way to diversify their assets. This move is likely driven by the fact that gold has historically performed well during times of economic uncertainty.

Gold is a tangible asset that can provide a hedge against inflation and market volatility. Banks may view gold as a way to reduce their reliance on fiat currencies.

Investing in gold can be a smart move for individuals as well, as it can provide a safe haven for their wealth.

Central banks have been buying gold in recent years, with a notable increase in 2021. Last year alone, central bank demand for gold reached record levels, pushing global gold reserves to their highest in almost 30 years.

Central banks want gold because it can't default or go bankrupt, unlike banks, corporations, or governments. This makes gold a safe-haven asset during times of economic turmoil.

Gold is also an effective portfolio diversifier, allowing central banks to protect their reserves from the devaluation of their national currencies. In times of crisis, central banks may print more money, but this can lead to a loss of value in their currencies.

Here are some reasons why central banks see gold as the ultimate hedge:

Since 2010, central banks have been consistent net buyers of gold, with last year's purchases totaling 463 tons, an 82% increase from 2020.

Gold is a proven long-term store of value, having held its value over the last 2,000 years, according to research by Duke University finance professor Campbell Harvey.

Central banks are buying more gold due to geopolitical tensions and economic uncertainty, with a record 1,082 metric tons purchased in 2022 and a near-record 1,037 metric tons in 2023.

The price of gold has climbed about 28% since the beginning of the year, making it a more attractive investment option for central banks and individual investors alike.

China is a major driver of central bank gold purchases, looking to "de-dollarize" and reduce its dependence on the US dollar, with some analysts predicting that China's central bank bullion stockpile will continue to grow.

Gold provides a sense of comfort and security, being a real, physical thing that can be held, as noted by Jeff Bredthauer at the University of Nebraska – Omaha.

Central banks are buying gold to diversify their portfolios and protect against inflation and economic downturns, with 61% of central banks expecting to increase their gold holdings over the next year, according to a World Gold Council survey.

In times of uncertainty, such as the current global economic situation, gold is becoming an increasingly attractive option for central banks and individual investors, with a record 750 tons of gold expected to be purchased by central banks in the second half of 2022, according to Goldman Sachs.

Gold is a natural hedge against paper money losing value due to its finite physical commodity status. This makes it an attractive option for central banks looking to diversify their reserves.

Central banks have been consistent net buyers of gold since 2010, with some exceptions in 2016 and 2020. In 2021, they bought a total of 463 tons of gold, an 82% increase from the previous year.

Gold's performance during times of crisis is a significant reason why central banks buy it. Its historical position as a long-term store of value also makes it an appealing choice.

Here are some key reasons why central banks saw gold as the ultimate hedge in 2021:

If you're looking to buy gold from a bank, it's essential to know that most physical bank locations don't carry precious metals on hand. You may need to schedule an appointment at a later date to make the actual purchase.

Central banks, on the other hand, have a different approach to buying gold. They often purchase gold in the Over-the-Counter (OTC) market from bullion banks or internationally-recognized gold refineries.

Central banks can also buy gold through the Bank of International Settlements (BIS) in Basel, Switzerland, which serves as a bank for central banks.

To buy gold from a bank, you'll need to start by contacting your local branch to see if they carry precious metals on hand. This isn't a common practice, so don't be surprised if they don't.

Central banks, on the other hand, buy gold in the Over-the-Counter (OTC) market, directly from a bullion bank or a recognized gold refinery like MKS PAMP. They also have the option to buy locally produced gold, which is common in gold-producing countries.

Central banks typically buy Good Delivery (GD) bars, which must meet certain standards, including a minimum quantity of 99.5% gold and a weight between 350oz and 430oz. These standards are set by the London Bullion Market Association (LBMA).

The MKS PAMP refinery is an important actor in the Good Delivery System, and it's accredited by the LBMA for gold, silver, platinum, and palladium. It's also one of the three refineries chosen by the LBMA to help maintain the system's high standards.

Central banks can also buy gold through the Bank of International Settlements (BIS), a financial institution based in Basel, Switzerland. The BIS serves as a bank for central banks.

Central banks have been buying gold in record numbers, with a record 1,082 metric tons purchased in 2022. This trend shows no signs of slowing down, with central banks on track to break the record again in 2024.

The World Gold Council survey found that 61% of central banks expect to increase their gold holdings over the next year. This is a significant increase, and it's clear that central banks see gold as a valuable asset for the future.

Central banks have been buying gold for a variety of reasons, including to diversify their portfolios and to protect against inflation and economic uncertainty. The conflict in Ukraine and the resulting sanctions have also led to an increase in gold buying by central banks.

In the first quarter of 2024, central banks accumulated a record 299.94 metric tons of gold, and an additional 183.39 metric tons arrived in the second quarter. This is a significant increase, and it shows that central banks are continuing to stockpile gold.

Gold is seen as a safe-haven asset, and central banks are buying it to protect against economic uncertainty. The price of gold has climbed about 28% since the beginning of the year, and investors are flocking to it as a safe-haven asset.

Central banks are also buying gold to reduce their dependence on the US dollar. China, in particular, is looking to "de-dollarize" and reduce its dependence on the dollar. Gold is seen as a valuable asset for this purpose, as it is a physical commodity that can't be devalued.

Buying gold from a bank can be a convenient option, but it's essential to consider the fees involved, which can range from 0.5% to 1% of the purchase price.

Banks typically require a minimum purchase amount, which can vary but is often around $100.

You'll also need to consider the storage fees, which can range from $10 to $50 per year, depending on the bank and the type of account you choose.

Some banks may offer a free storage option for a certain amount of time, usually 6-12 months.

The gold you purchase from a bank is usually stored in a secure vault, but it's a good idea to check the bank's security measures and insurance coverage.

Banks may also offer a buyback option, which can be a convenient way to sell your gold back to the bank in the future.

Central banks have been buying more gold due to geopolitical tensions and the need to diversify their holdings. The price of gold has climbed about 28% since the beginning of the year.

Some central banks see gold as a way to reduce their dependence on the US dollar. China is looking to "de-dollarize" and central banks like Poland are getting rid of Russian rubles.

The World Gold Council notes that 2022 was a record year for central banks buying gold, and 2023 was a near-record year. Central banks are looking for a physical asset that can hold its value long-term.

Gold provides something that stocks or bonds can't: it's a real, physical thing. This can be comforting, especially in times of uncertainty like elections, wars, and climate disasters.

Central banks like Uzbekistan, Turkey, the UAE, Qatar, and India are among the biggest buyers of gold. In fact, these countries were the biggest buyers in October, according to the latest data.

Goldman Sachs expects central bank demand for fine gold to reach historic levels in the second half of 2022. This is due to geopolitics and diversification being among the key reasons for buying gold.