Geopolitical risks pushing more central banks into gold - Central bank survey

According to the survey of 101 central banks, conducted by Central Banking Publications and sponsored by HSBC, 72.6% of participants invest in gold, up from 69.4% of respondents in last year’s survey. At the same time, 15 central banks, or 15.8%, said they were currently buying gold, and another three central banks said they would look to increase their official reserves in the next five to 10 years.

Meanwhile, only eight central banks, or 8.4%, said they were not interested in investing in the precious metal.

Among the 60 central banks that provided a forecast, the mean estimate for the price of gold at the end of 2026 was $5,354 per ounce.

The survey also noted modest interest in silver. Two central banks, or 2.2%, said they own silver, while three, or 3.4%, said they are currently considering investing, and four, or 4.5%, said they would consider investing in the next five to 10 years.

The expected diversification into gold comes as global central banks view geopolitical uncertainty as the biggest economic risk this year. According to the survey, 69.7% of central banks said that geopolitical tensions were their top concern.

The survey was first launched in January, with the final response received on March 6, as the U.S.-Israel joint war on Iran continued to escalate.

“Ongoing and emerging geopolitical conflicts are a major risk because they influence trade, capital flows, commodity prices and financial market correlations,” said a reserve manager at a central bank in the Middle East.

Although the chaos in the Middle East has seen renewed demand for the U.S. dollar as investors and nations build liquid positions, the survey noted that the perception of the U.S. dollar’s role as the world’s reserve currency continues to be challenged.

The survey showed that 80% of respondents agreed or strongly agreed that the U.S. dollar is still the safe-haven currency. However, nearly 16% said they were neutral, while another 4% said they disagreed that the greenback would remain the world’s reserve currency.

“Over the next five years, global FX reserve managers will rigorously assess whether the U.S. dollar’s role as the dominant global reserve currency will continue amid rising global fragmentation,” said a reserve manager at a central bank in the Asia-Pacific region.

Highlighting a comment from a reserve manager at a central bank in Europe, the report noted that the “diminishing faith” of investors in U.S. policies has affected the U.S. dollar.

“The survey highlights that geopolitical risk is resulting in diversification of portfolios, counterparties and location of assets. However, the US$ remains the dominant reserve currency with 78% of respondents predicting that de-dollarisation will be a gradual process. Gold is in focus, with 39% considering increasing holdings in the next year. The elevated price and volatility have also resulted in 37% planning to be more active in managing their gold reserves,” said  Bernard Altschuler, Global Head of Central Bank Coverage at HSBC, commenting on the survey.

While central banks are looking to diversify their holdings, they do not appear to be very interested in holding cryptocurrencies.

The survey showed that no participating central bank has invested in digital currencies; however, six central banks out of 86 respondents, or 7.0%, said they were considering investing in stablecoins in the next five to 10 years, and four out of 88 central banks said they were considering investing in other cryptocurrencies over that time horizon.

The survey also showed that just over half of central banks are against a strategic bitcoin reserve fund.

While geopolitical uncertainty remains the top risk this year, the survey said that central banks expect inflation and interest rates to be the most important factors affecting reserve management over the next five years.