Gold will continue to shine as more instability and chaos reigns within the world. We can see that central banks are adding gold in the present year as they seek to stay safe in a chaotic world.
Bloomberg and other publications note that central banks from Serbia to Thailand are adding gold. “Long term, gold is the most significant guardian and guarantor of protection against inflationary and other forms of financial risks,” said the National Bank of Serbia. Serbian President Aleksandar Vucic recently noted its monetary authority intends to increase holdings of the precious metal to 50 tonnes from 36.3 tonnes.
Meanwhile, Thailand notes that it had already purchased over 63 tonnes of gold just a few months ago and now sits at a total gold reserve of over 94 tonnes. This was one of the largest gold purchases by a central bank within 2021.
But it is not Thailand or Serbia but Ghana, too, that has noted that it would intend to purchase more gold due to concerns about inflation. A few nations are taking advantage of the short-term economic recovery to scale up their gold purchases to add more stability to their monetary policy.
As noted earlier, central banks are looking to position themselves to survive the different changes that may take place on the global financial landscape. They want to be like Hungary, Poland (central banks that purchased gold in 2021),and make sure to add a trusted safe haven asset and store of value that has lasted the test of time.
It is an asset that contributes to more confidence and fosters stability in the markets. Many still view gold as a safe asset, as safe or even safer than the dollar. Leaders at central banks and other financial institutions appreciate the fact that gold is scarce, stable, is around for the long term.
They certainly are pleased with the fact that there is little to no credit and counterparty issues related to the shiny precious metal. These individuals realize that gold assets are not a claim against others, it merely is an asset that holds significant value.
As gold diversifies risks, it protects wealth and builds more confidence in countries that possess the valuable asset. Gold is a precious metal that has quite a bit of power in times when trouble and financial instability run rampant.
Geopolitical Crisis Factors
The world is far from stable. The coronavirus, or rather, the government and its response to the coronavirus has created quite a bit of havoc in the economy. While financial markets in G20 countries may be soaring, the economy looks a tad bit different.
For instance, SentryHill noted how South Africa has over 25% unemployment rate. It has also seen unexpected leadership changes along with other countries in the region. Meanwhile, the coronavirus has plunged more individuals in places like India, the United States and many countries in Europe into poverty. The economic devastation has created unrest in Iran, Iraq, Lebanon, among other nations.
We also see the unrest taking place in Colombia, Cuba, Venezuela, and other countries that seem as if they are falling apart.
COVID-19 is tearing through these countries and affecting livelihoods and creating significant unrest. You may hear about some of this unrest and may not hear about the other types of unrest. But you better believe that people are not happy and central banks are preparing for instability with gold purchases.
Why Are they Turning To Gold?
Gold allows central banks to be currency neutral and hold a store of value that everyone can agree on and has agreed for centuries. These central banks are looking to gold provide a bit of stability in a world where more countries, corporations, and individuals are in debt. These debt problems are causing a slew of problems that range from malinvestment to a low quality of life to productivity issues and other societal problems.