At a panel discussion which took place during the 2024 LBMA Precious Metals Conference, representatives of three central banks said that gold’s role as a reserve asset in global foreign reserves will continue to grow.
According to Kitco, Czech National Bank has been a net buyer of gold for 18 consecutive months and purchased 32.8 tons of gold for a total of 44.8 tons, or 2.4% of its reserves. The Bank of Mongolia is also fairly active in the gold market and holds 4.9 tons of gold, representing 8.7% of its official reserves. So far this year, the central bank has increased its official reserves by 2.4 tons.
In North America, Banco de México has purchased 0.5 tonnes of gold so far this year. However, most of the central bank’s gold was acquired in 2011. It currently holds 120.4 tonnes, representing 4.2% of its official foreign reserves.
The panel also discussed the growing attractiveness of gold as a global currency as nations seek alternatives to the U.S. dollar.
Enkhjin Atarbaatar, Director General of the Financial Markets Department at the Central Bank of Mongolia said that the country currently holds 80% of its reserves in U.S. dollar assets. However, Mongolia depends on Russia for its oil supply and uses Chinese yuan as currency for these transactions.
“We can’t use the U.S. dollar,” he said. “If you can’t use it, what value does it really have?”
Given these challenges, Atarbaatar suggested that, in a hypothetical scenario, central banks might use gold to settle international trade. He added that Mongolia does not view its gold as a liquidity tool. Instead, the central bank primarily holds gold for diversification purposes.
Theodor Lisovoy, Managing Editor, Rough&Polished
