Gold continue to gain value as covid lingers

SINGAPORE - July 20, 2020 - PRLog -- The global economy was flashing danger signs long before the pandemic. For one thing, many countries were clamouring to get hold of as much gold as possible. For the past decade, they have been buying new reserves and bringing it home from overseas storage to an extent never seen in modern times.

Central banks added 650 tons to their reserves in 2019, the second highest shift in 50 years, after the 656 tons added in 2018. Before the 2007-09 financial crisis, central banks were net sellers of gold worldwide for decades. Leading the recent spree has been China, Russia, Turkey, Kazakhstan and Uzbekistan.

We have also seen a large effort by central banks to repatriate their gold from other countries, mostly from storage in New York and London.

This dash to gold is about geopolitics and economics. Gold serves as a patch mark of nationalist identity. To quote Adam Glapinski, governor of the National Bank of Poland, "gold symbolises the strength of [a] country".

Countries also seem unnerved by the row over Venezuela's gold, plus the fact that Germany's repatriated bars from the US appeared different to what it thought was in store. This suggested the Federal Reserve was trading them.

It will be a few months before we see how the pandemic has affected central banks' attitude to gold. It could yet convince them that gold will still move higher. So don't be surprised if this dash to gold has resumed in recent weeks – in a leading indicator of troubling times ahead.

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