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Central banks around the world increase gold in their reserves and accelerate their departure from the US dollar

Published:

Jan 1, 2022 13:52 GMT

Over the past decade, central banks have increased their reserves of the precious metal by more than 4,500 tonnes.

Central banks around the world are increasing the amount of gold they hold in their reserves, raising the total in 2021 to a maximum of 31 years, according to analysts consulted by the Japanese newspaper Nikkei Asia.

During the last decade, central banks have increased their precious metal reserves by more than 4,500 tons, according to data from the World Gold Council, an international research organization for the gold industry. In September, reserves totaled about 36,000 tonnes, the most since 1990 and 15% more than a decade earlier.

Gold holdings started to increase around 2009. Until then, central banks and other public institutions used to sell it to increase holdings of US dollar-denominated assets. Given that the United States enjoyed a buoyant economy in the 1990s as the sole superpower after the end of the Cold War, the benefits generated by dollar-denominated assets were attractive to other countries, experts say.

The financial crisis of 2008 and the departure of the dollar

However, specialists note that the value of the dollar against gold has fallen sharply in the last decade, as large-scale monetary easing has continued to drive the supply of the US currency. Although the board of the US Federal Reserve (Fed) has made it clear that it is ending its easy money policy and has projected that it will start raising interest rates in 2022, multiple central banks, especially in emerging economies continue to bet on gold, reflecting the global concern over the dollar-based monetary regime. Thus, in the first nine months of 2021, Thailand bought about 90 tons of the precious metal, India 70 tons and Brazil 60 tons.

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The global financial crisis of 2008 caused an outflow of funds even from the public debt of the North American country, which caused a drop in the value of dollar-denominated assets. Confidence in these assets “faltered,” said market analyst Itsuo Toyoshima.

Following the crisis, long-term interest rates in the US fell as a result of large-scale monetary easing, making continued holding of assets denominated in the US currency less advantageous. Central banks in emerging economies with poor credit strength began to “protect your assets with gold“explained Koichiro Kamei, a precious metals and financial analyst.

The presence of the dollar in foreign exchange reserves is declining, in contrast to the growth of gold. In 2020, the dollar’s currency share fell to its lowest level in a quarter of a century.

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HELEN HERNANDEZ

Helen Hernandez is our best writer. Helen writes about social news and celebrity gossip. She loves watching movies since childhood. Email: Helen@oicanadian.com Phone : +1 281-333-2229

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