Precious metals such as gold play an integral role in the preservation and transfer of wealth across the country. While fiat currencies such as the dollar and the British pound tend to depreciate and appreciate depending on economic conditions, gold is known to retain its value over the long term.
This allows investors to preserve the value of their holdings during times of economic upheaval, such as inflation, by purchasing gold bullion or gold stocks.
Although gold itself doesn’t appreciate in value as do some assets and will not provide you with an interest rate, investing in gold is a tried and tested way of preventing wealth from depreciating due to inflation.
Data from the World Gold Council has revealed that central banks turned to gold in droves last year, making 2022 a record year for gold sales. The WGC revealed last week that new gold purchases rose by 1,136 tons through the year to top out at $70 billion in total sales.
Gold purchase levels recorded last year were the highest they had been in any year since 1950, and they represented the 13th year of consecutive annual net gold inflows.
Last year’s record-setting gold sales were partly due to increased demand for gold among central banks and investors amid stagnating economic conditions across the globe, inflation, and increased cost of living.
The WGC’s annual Gold Demand Trends report revealed that central banks purchased 417 tons of gold in the fourth quarter of 2022 and nearly matched the entirety of gold purchases in all of 2021 (450 tons). In total, the second half of the year saw central banks purchase a whopping 862 tons of gold.
The data from WGC shows that there has been a significant change in attitudes regarding gold from the late ‘90s and 2000s when central banks, especially those in Europe, began selling off hundreds of tons of their gold bullion per year.
Banks in Europe finally stopped selling gold bullion after the financial crisis of 2008–2009 and an increasing number of emerging economies such as Turkey, India and Russia have been steadily increasing their gold bullion stocks.
WGC analyst Krishan Gopaul stated that last year’s data signified a continuation of the gold-buying trend among central banks, stating that geopolitical and macroeconomic factors created a ton of volatility and uncertainty.
Gold purchases faltered during the pandemic but surged in the second half of 2022 when central banks across the globe bought 862 tons of gold from July to December, the WGC added. However, the WGC noted that gold purchases by central banks this year were unlikely to reach 2022 levels.
That notwithstanding, investors are likely to keep a close eye on gold stocks such as Freeport-McMoRan (NYSE: FCX) as gold and gold stocks become an attractive investment amid the economic uncertainty.
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