Central banks intensify gold purchases to protect currencies

It seems that the tensions in the Middle East make gold a safe haven for countries during the coming period, as central banks consider it a highly liquid asset and a profitable window to diversify their reserves. Therefore, many banks are rushing towards the yellow metal to support their currency and secure part of their holdings until the storm calms down.

Investors flock to gold as a hedging tool in times of crises, as it is a safe asset whose value increases from time to time, but experts warn individual investors against dealing with gold on the principle of speculation, as is the case in stock markets, because it is a long-term investment tool and can be considered medium-term if there are jumps. Great price.

Countries' purchases of gold

According to the latest report on trends in gold demand issued by the World Gold Council, on November 1, 2023, net purchases of gold by central banks from the beginning of 2023 until now have recorded a growth of 14% compared to the year 2022.

The report said: “Central banks globally have purchased a net 800 tons of gold so far this year, the highest level recorded in a nine-month period.”

Experts said in press statements that gold is witnessing a period of great prosperity during the coming period, especially with the failure to reach a solution regarding the war in Gaza, in addition to speculation that the US Federal Reserve will soon end its monetary tightening policy or at least stabilize interest rates.

A new global financial system

Economic analyst Dr. Yasser Amara said that the features of a multipolar global financial system on the part of strong economic blocs are looming on the economic scene, in which gold is the main base for determining the purchasing power of the currency, with many countries wanting to reduce the peg of their currency to the dollar, or for the yellow metal to be considered a component and determinant. In large part to the strength of the currency.

Amara, who is a member of the Board of Directors of the Egyptian Securities Federation, added that this is evident from the trends of central banks to buy gold, especially China, India, Russia, Turkey and Egypt, which confirms its dominance over global commodities, compared to other types of metals and commodities, whether oil, copper, or others.

Amara explained that it cannot be doubted that gold is considered the most important global safe haven, especially since no country lost bets on it during the last period, after the record highs it recorded at the international level, expecting that the demand for it will increase in the coming era to maintain the purchasing power of money.

Interest rate on the dollar

Financial and commodity markets analyst, Sayed Awaidi, believes that gold has become the focus of interest in many countries during the recent period, as this began with the Corona pandemic and then the Russian-Ukrainian crisis, which prompted various central banks to enhance their purchases of the yellow metal as a form of forming their reserves, as it is an important factor in supporting... The country's currency and the face of inflation.

He pointed out that geopolitical changes are already affecting the price of gold during the coming period, as well as the interest rate on the dollar by the US Federal Reserve, explaining that the Fed is dealing with the available and officially announced economic indicators that are still moving according to the expectations of the monetary authorities.

Gold price forecast

Awaidi continued: “Despite speculation that the interest rate hike phase will end soon, this cannot be confirmed except at the next meeting of the US Federal Reserve and in comparison, with the geopolitical factors in the Middle East. However, he confirms that central banks will continue their purchases, especially emerging markets, with expectations of greater jumps in the price of gold globally.” In the near future".

The international banks that purchased the most gold during the third quarter of this year, in order, were China, Poland, Singapore, Libya, India, Qatar, the Philippines, Iraq, and the European Central Bank. Turkey and India were also among the main buyers of the yellow metal during the past month, according to World Gold Council.