GOLD DESTHRON EURO as the second most important reserve system in the world

At the end of last year, the share of gold in the global reserves at market prices reached 20 percent and thus exceeded the euro, which achieved 16 percent, as can be seen from the annual assessment of the European Central Bank on the international position of the currency. The dollar continued its steady decline and reached 46 percent of the global reserves.

The rapid increase in the gold price – he has doubled since the end of 2022 – was partially fired by purchases from the central banks. State institutions have bought more than 1,000 tons per year in the past three years – twice as much as their average purchase pace before 2022. Their stocks are now at the level again, which was last reached in the late 1970s.

Ukraine War: Demand increased extremely

« The demand for gold for currency reserves has risen sharply after the extensive invasion of Russia into Ukraine in 2022 and remains high, » wrote the ECB in its report.

Freezing the Russian foreign exchange reserves in the G7 currencies after the invasion of Ukraine prompted some banks to reduce their commitment in the western financial system. In addition, there was a risk of inflation and speculation that the United States would treat foreign creditors less cheaply.

Historically, gold prices and real returns are in a negative correlation, since higher yields prevent gold investors that do not remove interest. According to the ECB report, this relationship has collapsed since 2022 when the central banks began to buy the yellow metal against sanction risks despite increasing interest rates worldwide.

« Countries that are geopolitically close to China and Russia have seen a clearer increase in the gold share of their official foreign exchange reserves since the last quarter of 2021, » wrote the ECB economists.