A survey by the World Gold Council (WGC) suggests that central bank buying, a key contributor to the gold rally, will increase further this year.
This offers some potential upside to the gold price forecast, with Bank of America saying in a recent note that bullion could reach $4,000/oz by year-end.
According to the survey, central banks continue to hold favourable expectations of the safe-haven asset. A total 95% of respondents expected global central bank gold reserves to increase over the next 12 months.
Nearly half of the central banks surveyed by the WGC believed that their own gold reserves would increase over the same period, and none of them anticipated a decline in their holdings.
“The sample is highly representative of the overall central bank community, geographically and in terms of gold owned,” said the WGC, a leading authority on gold market research.
The survey also shows an uptick in respondents actively managing their gold reserves, with risk management an increasingly common driver.
The findings come as monetary authorities are turning to gold as a hedge against geopolitical tension and economic uncertainty.
In each of the past three years, central banks have accumulated more than 1,000 tonnes of gold, reflecting a sharp uptick from the 400 tonnes-500 tonnes average recorded over the preceding decade.
The surge in buying began in 2022 after the US froze Russia’s central bank assets in response to its invasion of Ukraine and has since been supported by last year’s election cycle, war in the Middle East (a major oil-producing region) and US policy uncertainty.
Earlier this month, gold soared above $3,440/oz after Israel launched an attack on Iranian nuclear and military facilities, driving a surge in safe-haven demand.
Central banks have continued to flock to gold this year as US President Donald Trump’s tariffs and protectionist policies threaten to disrupt global growth and trade.
This was evidenced by a spike in the price of bullion in early April after the unveiling of Trump’s sweeping reciprocal tariffs, with the rally slowing when the mandate was put on hold for 90 days.
Trump’s antics have also called into question the role of the US dollar as a store of value, with nearly three-quarters of respondents in the survey expecting to see moderate or significantly lower US dollar holdings within global reserves over the next five years.
Respondents also believed that the share of other currencies, such as the euro and renminbi, as well as gold, will increase over the same period, filling the gap left by the greenback.
WGC market strategist John Reade told Business Day earlier this year that the US dollar has been the most important reserve currency for the past few decades. However, the weaponisation of the dollar in recent years, Trump’s potentially inflationary policies and concerns about the country’s unsustainable debt burden have threatened its dominance.
“As the world becomes increasingly volatile and unpredictable, gold’s safety, liquidity and return characteristics — the three key investment objectives for central banks — have risen in importance,” said the WGC.
Over the course of 2024 the gold price set 40 record highs and gained 25.5% by year-end, recording its best showing since 2010 and outperforming all major asset classes based on indices from Bloomberg and the ICE Benchmark Administration.
As gold continues to beat expectations, many Wall Street analysts have been rethinking their forecasts in recent weeks, with JPMorgan and Bank of America analysts seeing potential for the metal to reach $4,000/oz in the second half of the year.
Goldman Sachs expects gold to end the year at $3,700/oz, with strong central bank demand a key driver.
SA gold miners have relished the metal’s stellar performance, which continues to free up capital for acquisitive growth and allow them to cut operating costs in the country’s ageing,
deep-level mines.
Addressing the London Indaba on Tuesday, Gold Fields CEO Mike Fraser was bullish about the metal’s prospects, saying he saw upside potential in this year’s forecast.
According to its latest commodity market outlook, the World Bank expects gold prices to rise 36% this year to an average of $3,250/oz, before softening slightly to $3,200/oz in 2026.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.