Gold central bank demand to persist

Gold has been a cornerstone of central bank reserves throughout history and, for a lot of that time, countries were on a gold standard, the company explains.

Although gold is no longer used to back money, central banks continue to hold gold reserves as a long-term store of value and inflation hedge, particularly for its performance in a crisis and as a diversifier, it adds.

Demand for gold from central banks remains strong despite high gold prices.

At the end of last year, gold had overtaken US Treasuries as the most valuable reserve asset.

Heraeus attributes this to the strong rally in gold prices increasing the value of existing reserves, as well as central banks being net buyers of gold since 2010.

Central banks bought 863 t of gold last year, and more than 1000 t yearly from 2022 to 2024, the company points out.

It cites figures which show that gold accounted for 27% of official reserve assets at the end of last year, with US Treasuries at 22%.

Over the next 12 months, 45% of central banks expect their gold reserves to increase, according to the World Gold Council Central Bank Gold Reserves Survey 2026, with only 1% expecting them to decrease.

This is a slight increase from 43% in the 2025 survey, but notably higher than 8% in 2019 and 20% in 2020, Heraeus explains.

In the latest central bank survey, 75% of respondents that manage their gold reserves separately view their reserves as a strategic asset, whereas only 44% view them as a historical legacy asset, the company points out. It notes that this has changed considerably from 2024, when 64% considered their gold reserves as a strategic asset and 62% viewed them as a historical legacy asset.

“The appeal of gold comes from its high liquidity and the lack of counterparty. The majority of central bank reserves are held in the form of foreign currency and bonds. This allows for efficient payment for imports and servicing of external debt. While these assets, US Treasuries, Gilts, etc. are highly liquid, they hold some level of counterparty risk.

“This risk was highlighted in 2022 as the US and its allies froze Russian holdings of Treasuries and other offshore assets. Unlike these, gold, if stored domestically, has no counterparty, and there are always willing buyers.

“Jurisdiction is important here, if gold reserves are held overseas they could be frozen by the host country. In response to this there have been various instances of repatriation of gold reserves by India, Germany and, most recently, France,” Heraeus outlines.

It highlights central banks’ gold reserves as useful in times of crisis, such as a large oil shock.

Gold reserves being liquid and universally recognised, along with attracting large demand from institutions and retail investors, allows them to be mobilised in times of crisis, the company avers.

The appraisal also notes that South African platinum group metals (PGM) supply rose sharply in April.

Data published by Statistics South Africa shows South African PGM mine production increased by 36.5% year-on-year in April, making PGMs the largest driver of the 8.2% rise in overall mining production.

This follows a strong first quarter, when the PGM production index was around 21% higher than in the first quarter of the previous year, reflecting a broader recovery in South Africa’s platinum-heavy mined supply.

The strong year-on-year gains also reflect a weak comparison period, after heavy rains weighed on PGM output in early 2025, Heraeus points out.

The strong start to this year precedes the routine smelter maintenance by Impala Platinum and Valterra Platinum planned for the third quarter, which could lead to weaker production in this period than in previous years, the company warns.

After breaking support on June 5 and dropping to a low for the year, the platinum price has staged a rally back to the $1800/oz area, Heraeus informs. However, it cautions that support often turns into resistance, with the price pulling back sharply, retreating to $1650/oz on June 19.