Central banks shift gold reserves amid geopolitical uncertainty

Central banks are increasingly altering their gold reserve management strategies, opting to move assets back to their home countries or diversify storage locations internationally. This shift is driven by growing concerns over geopolitical risks and a desire to exert greater control over their reserve assets, as reported by The Wall Street Journal.

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A smaller number of central banks are storing their gold bars in London and New York.

A recent survey by the World Gold Council indicates a decline in the number of central banks storing gold in London and New York, historically the world's most liquid gold bullion markets. While 57% of surveyed institutions still hold gold at the Bank of England, this is down from 64% the previous year. Similarly, gold held at the U.S. Federal Reserve in New York has decreased from 17% to 14% of respondents. Despite this, the Bank of England remains the most utilized gold storage location globally.

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57% of participating institutions hold gold in the Bank of England's vaults, compared to 64% in the previous year.

The survey highlights a new trend: a growing number of central banks are prioritizing the diversification of their gold storage locations. In the past 12 months, 19% of participating institutions reported increasing their domestically held gold or distributing reserves across multiple foreign locations, a significant jump from just 7% in the previous survey. This diversification is expected to continue, with 7% of central banks planning to expand domestic storage capacity in the next year and 9% considering further international diversification.

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14% of respondents stated they keep gold at the Federal Reserve Bank of New York, down from 17%.

These changes in storage practices occur as central banks maintain high levels of gold purchases. The World Gold Council notes that annual central bank acquisitions have averaged around 1,000 tons over the last four years, doubling the average of approximately 500 tons per year in the preceding decade. The organization attributes this surge to geopolitical and economic uncertainties, which are prompting reserve managers to place greater importance on gold as a safe-haven asset during periods of volatility.

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19% of participating institutions stated that in the last 12 months, they have increased the amount of gold kept domestically or chosen to distribute reserves among multiple locations abroad.