It seems that the US dollar’s woes are not ending anytime soon, as the greenback may continue to…

It seems that the US dollar’s woes are not ending anytime soon, as the greenback may continue to face volatility in the near future. The rising geopolitical tensions and unrest are compelling investors to revise their investment strategies, moving towards the ever-dependable gold to hinge on for the long haul. Following a similar narrative, central banks around the world are expected to ramp up their gold holdings, as the war tensions in the Middle East continue to weaken the American currency.

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Central Banks To Cut Down On US Dollar Holdings

The US dollar hegemony is currently on a transformative path as it continues to gain new competitors and challenges in its wake. As the Middle East tensions escalate with the Israel-Iran war crisis deepening rapidly, the central banks around the world may expedite their gold purchases, pivoting towards the evergreen bullion in times of acute crisis.

Per a recent survey conducted by the World Gold Council, bullion is once again shining brightly in the asset domain, compelling central banks to stock up on gold to balance their reserves.

The global war crisis and the fear of sanctions, coupled with the concern regarding the eroding status of the dollar are three conditions that are pushing global banks to stockpile gold at a rapid pace.

“Central banks have accumulated over 1,000t of gold in each of the last three years, up significantly from the 400-500t average over the preceding decade. 1 This marked acceleration in the pace of accumulation has occurred against a backdrop of geopolitical and economic uncertainty, which has clouded the outlook for reserve managers and investors alike.”

Moreover, 95% of respondents of the World Gold Council expect global banks to target the yellow metal amid deepening geopolitical unrest in the next 12 months.

“Similar to findings from previous surveys, central banks continue to hold favorable expectations on gold. Respondents overwhelmingly (95%) believe that global central bank gold reserves will increase over the next 12 months.”

At the same time, three-quarters of respondents expect US dollar holdings to get cut as banks rush towards bulking up on gold.

“The majority of respondents (73%) see moderate or significantly lower US dollar holdings within global reserves over the next five years.”

Gold Repatriation Is Trending

As the world economies revise their strategies amid escalating war tensions in the Middle East, the process of accessing gold in times of crisis has now taken center stage. This development has led many central banks to repatriate gold assets back to their countries, enabling easy access in times of acute economic distress.

Per the Financial Times, India has repatriated nearly 100 tons of gold from the Bank of England for a more secure access to the asset during bleak economic times.

“The sentiment is very strong; certainly there’s more confidence among central banks that the entire universe of central banks is going to buy and that their own central bank might buy,” as shared by Shaokai Fan of the WGC.

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