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State investors stock up on record gold reserves amid uncertainty

State investors stock up on record gold reserves amid uncertainty

gata.org / By Attracta Mooney / Sunday, June 11, 2017

The gold reserves of the world’s biggest public sector investors reached an 18-year high as they hoarded the precious metal after Donald Trump’s election and the Brexit vote added to geopolitical uncertainty.

State investors increased their net gold holdings by 377 tonnes to an estimated 31,000 tonnes last year — the highest level since 1999, according to a study of 750 central banks, public pension plans and sovereign wealth funds with $33.5 trillion in assets.

Danae Kyriakopoulou, chief economist at the Official Monetary and Financial Forum, the central bankers’ forum that compiled the research, said state investors had flocked to the precious metal because of its status as a “haven asset” and to take advantage of rising prices.

“There was a lot of political uncertainty in the past year. There were big political shocks with Brexit and Trump, which have driven investors back to gold,” she said.

The price of gold surged after the unexpected Brexit vote in June and immediately after the election of Mr. Trump in November, although it fell in the final weeks of the year.

Alistair Hewitt, head of market intelligence at the World Gold Council, said state-backed investors had also increased their gold stores as a hedge against the stronger dollar. The dollar is up 15 percent against the pound over the past year.

“Central banks and public institutions have been adding to their strategic gold holdings for a number of years,” Mr. Hewitt said. “A lot of emerging market central banks hold significant amounts of US dollars, and they have bought gold as a hedge against this concentrated currency exposure.” …

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