Pension Funds, Sovereign Wealth Funds, Central Banks “Stock Up” on Gold “Amid Uncertainty”

Pension Funds, Sovereign Wealth Funds and Central Banks “Stock Up” on Gold “Amid Uncertainty”

By Attracta Mooney
Financial Times, London
Sunday, June 11, 2017

The gold reserves of the world’s biggest public sector investors reached an 18-year high as they hoarded the precious metal after Donald Trump’s election and the Brexit vote added to geopolitical uncertainty.

State investors increased their net gold holdings by 377 tonnes to an estimated 31,000 tonnes last year — the highest level since 1999, according to a study of 750 central banks, public pension plans and sovereign wealth funds with $33.5 trillion in assets.

Danae Kyriakopoulou, chief economist at the Official Monetary and Financial Forum, the central bankers’ forum that compiled the research, said state investors had flocked to the precious metal because of its status as a “haven asset” and to take advantage of rising prices.

“There was a lot of political uncertainty in the past year. There were big political shocks with Brexit and Trump, which have driven investors back to gold,” she said.

The price of gold surged after the unexpected Brexit vote in June and immediately after the election of Mr. Trump in November, although it fell in the final weeks of the year.

Alistair Hewitt, head of market intelligence at the World Gold Council, said state-backed investors had also increased their gold stores as a hedge against the stronger dollar. The dollar is up 15 percent against the pound over the past year.

“Central banks and public institutions have been adding to their strategic gold holdings for a number of years,” Mr. Hewitt said. “A lot of emerging market central banks hold significant amounts of US dollars, and they have bought gold as a hedge against this concentrated currency exposure.” …

Remainder of report via FT: 

In 2013, the global monetary think-tank, the Official Monetary and Financial Institutions Forum (OMFIF),  warned in a wide-ranging analysis of the world monetary system of “twin shocks” to the dollar and the euro and of a “coming dollar shock” and pointed out how gold would be a safe haven in a dollar crisis.

Demand for physical gold is likely to rise as the world heads towards a multi-currency reserve system under the impact of uncertainty impacting the stability of the dollar and the euro, the main currencies held by central banks and sovereign wealth funds.
See here: “Gold Will Prove A Haven From Currency Storms” – OMFIF Study

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