Gold prices have tanked since March, driven by the Federal Reserve’s tightening crusade that has lifted the US dollar.
Central banks took advantage of the discounts by adding more than 20 tons of gold to their reserves in August, according to the World Gold Council (WGC).
The report found that three institutions drove the buying frenzy last month: Turkey (8.9 tons), Uzbekistan (8.7 tons), and Kazakhstan (two tons).
Interestingly enough, there was no net selling.
“This is a continuation of the strong buying that we saw last year and we now expect full-year central bank demand for 2022 to be on a par with 2021 levels,” the group wrote in its report. “Gold’s performance during a time of crisis and its role as a long-term store of value/inflation hedge are key determinants in the decisions of central banks to hold it.”
So, what does the future of gold look like in the coming months?
“Looking ahead, we see both threats and opportunities for gold in H2 2022. Safe haven demand will likely continue to support gold investment, but further monetary tightening and continued dollar strength may pose headwinds,” said Louise Street, Senior Analyst EMEA at the World Gold Council.
“As many countries face economic weakness and the cost- of-living crises continues to squeeze spending, consumer driven demand will likely soften, although there should be pockets of strength.”
At the time of this writing, gold prices topped $1,720 on Tuesday, enjoying a 5% rally so far this week.
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