Gold prices have been on a steady rise this year, hitting all-time highs 35 times in 2024. So far, the price of gold has surged by 33%, leaving many wondering what’s driving this incredible increase. While various factors contribute to this trend, the most significant reason is the massive gold purchasing by central banks across the globe.
Central Banks Lead the Gold Rush
Countries like India, China, Türkiye, and Poland are leading the charge in buying gold. The central banks of these nations have been stocking up on gold reserves as a way to diversify their holdings, which is one of the main drivers of the price hike. In fact, central banks now hold 12.1% of the world’s total gold reserves, the highest level seen since the 1990s.
Gold reserves at central banks have surged over the last decade, almost doubling in size. China’s gold reserves, for instance, have reached 2,264 tonnes, making up 5.4% of its foreign exchange reserves. While China remains the largest consumer of gold globally, India is not far behind, with massive private gold holdings among its population.
Why Are Central Banks Buying So Much Gold?
The trend of central banks purchasing large amounts of gold isn’t new, but it has accelerated in the past couple of years. In 2022 and 2023, central banks globally purchased over 1,000 tonnes of gold. A major reason behind this is geopolitical instability, especially after the Ukraine-Russia conflict, where many Western nations froze Russia’s foreign assets. This move sent shockwaves through the global financial system, prompting countries to look for alternatives to the US dollar for their foreign reserves.
Gold is seen as a safe-haven asset, particularly during times of economic uncertainty. It serves as a hedge against inflation, and the recent Middle East tensions have only increased the demand for gold, driving up its value further. Historically, whenever there’s a major global crisis, gold prices surge, and this year is no exception.
Which Countries Hold the Most Gold?
The United States leads the world with the largest gold reserves, holding an impressive 8,133 tonnes of the precious metal. It is followed by Germany with 3,353 tonnes, Italy with 2,452 tonnes, and France with 2,437 tonnes. Russia, with its 2,335 tonnes of gold, is also a major player, while smaller countries like Switzerland (1,040 tonnes) and Japan (847 tonnes) maintain significant reserves. India holds 840 tonnes of gold in its official reserves, but interestingly, private individuals in India are estimated to collectively own about 25,000 tonnes of gold, the largest private holdings in the world.
Gold Prices Today
While the demand for gold is strong, recent market activity has shown some fluctuation in prices. Due to weak demand from jewelers and retailers, the price of gold in Delhi’s bullion market fell by ₹1,150 to ₹80,050 per 10 grams on Friday. Silver prices also took a hit, dropping by ₹2,000 to ₹99,000 per kilogram. On the Multi Commodity Exchange (MCX), gold futures for December delivery were down by ₹406 or 0.52%, settling at ₹77,921 per 10 grams.
Globally, gold futures in the commodity market were also down by $15.90 per ounce, or 0.58%, with the price standing at $2,733 per ounce.
The Bottom Line
With central banks diversifying their reserves and geopolitical instability continuing to drive gold demand, the upward trajectory of gold prices in 2024 seems far from over. For now, gold continues to be one of the most sought-after safe-haven assets, offering security in an uncertain global economy.
