Central Banks to Keep Buying Gold / Commodities / Gold and Silver 2021
The move away fromthe Federal Reserve Note as the global reserve currency of choice has continuedin recent years, with fresh developments increasing the greenback’s stiffcompetition.
This has led tomassive central bank buying of gold, and that trend appears set to continue in2021. According to a recent report from the World Gold Council, 21% of globalcentral banks plan to purchase gold this year.
Why Do Central BanksKeep Buying?
There are a varietyof reasons for central banks to buy and hold gold.
The yellow metal’sreputation as a portfolio diversifier and its role as a safe-haven asset arewell known and discussed.
But gold’s abilityto improve risk-adjusted returns while also serving as an important form ofcollateral are less talked about topics that may be just as important.
The World GoldCouncil’s survey also indicated that no central bank has plans to sell its goldreserves this year, having fallen from a 4% reading last year.
“This year’s survey continues to highlight significant interest in goldamongst central banks, with the backdrop of the COVID-19 pandemic underscoringthe importance of maintaining liquid, uncorrelated assets in a reserveportfolio.
“Inflation has alsoresurfaced as an investment consideration and may inform centralbank asset allocation in the coming years. We believe that central banks willcontinue to be net buyers of gold, albeit at somewhat lower volumes than thoseof the previous decade.”
Gold’s strongperformance during the Covid-19 epidemic is likely to become the top reason forcentral bank buying this year.
Here are key reasonswhy global monetary planners are accumulating gold:
Gold is reliable and trusted. Gold has been a reliable store of wealth and protector of value for centuries – and that reputation is unlikely to change anytime soon. Adding gold can lend credibility to a central bank and its currency.
Gold is an inflation fighter. With inflation now clearly on the rise, it is more important than ever to own assets that may outperform as prices rise. With the Federal Reserve and other global central banks holding rates at or near zero while printing money each month, the need for an inflationary hedge has never been more pressing.
Gold has zero counterparty risk. The gold market is global, and the metal carries zero counterparty risk. It cannot go bankrupt, default, or otherwise screw its owners. Gold is recognized and valued all over the globe and is always accepted as payment.
Gold can be used for interventions. Gold is the ultimate currency, and having a gold holding as part of central bank reserves provides central planners a powerful tool to intervene in the markets for whatever purposes.
The key takeaway: Ifgold is being accumulated by the largest, most powerful financial institutionson Earth, shouldn’t you do so also?
Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.
© 2021 Stefan Gleason - All Rights Reserved
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