Why Are Nations Adding to Gold Reserves?

Governments and their central banks represent the largest players in modern financial markets. If these financial superpowers are acquiring and stockpiling more gold, maybe you should consider an allocation in gold as well.

The Importance Of Gold

Gold’s importance to the global economy cannot be understated. The reality is that if gold were simply a relic of the past without true purpose or value, central banks would not buy and hoard the yellow metal.

What do these central banks know that you don’t? Why did global central banks buy more gold in 2022 than they have in recent years?

Central banks began adding to gold holdings in 2008. Of course, this corresponds to the time when the world was embroiled in the financial crises, and there was a real risk of contagion. Central banks likely sought gold in order to provide some stability to their holdings.

Since the financial crises and recession, central banks continue to hold gold. While the U.S. has just recently ended its near decade-long policy of zero interest rates, real risks to the global economy remain. Take your pick: A slowing Chinese economy, inflation, lack of growth… There are clearly many potential issues that could send the global economy back into recession.

Let’s not forget the potential effects of trillions of dollars worth of bond buying by various central banks in recent years… And now the effects of those central banks attempting to reverse their policies and tighten interest rates.

If global central banks like to buy gold to potentially stabilize and diversify their holdings, what does that say about the global economy going forward?

While the U.S. economy has shown some signs of rebounding, the risk of falling back into recession remains. Not only that but the U.S. economy cannot be expected to support the global economy on an ongoing basis.

Why Gold Is Better

With lackluster growth, the real threat of inflation, and other issues causing concern, central banks need a way to reduce and hedge volatility risks in their foreign reserves. What better asset to use than gold?

Gold can offer valuable diversification. It may also potentially hedge against the risks of inflation and even deflation. It also serves as a key backstop to paper currencies.

Perhaps the central banks of the world see some challenging times ahead…

As if global economic concerns are not enough to contend with, we are also in the midst of a currency war. There is considerable uncertainty about the future of the U.S. dollar as the global reserve currency of choice, and several nations have already begun to move away from the greenback.

With the current degree of uncertainty over the dollar’s future and the tendency for fiat currencies to lose value over time, doesn’t it make sense to incorporate assets that can potentially protect purchasing power?

Central banks apparently think so. After all, he who has the gold has the power. Gold provides credibility and trust and can bolster a nation’s status among the economic powers of the world. Why do you think China has been amassing gold? Is this coincidence given the nation’s push to have its currency take center stage?

We don’t think so…

The Bottom Line

Central banks have plenty of reasons to want to acquire and hold gold. Perhaps you should too.

Adding physical gold to your portfolio has never been easier. Today, you can buy physical gold in bar or coin form and store at home, in a safe deposit box, or in a depository. You can even use an existing IRA account to buy and hold physical gold. No IRA? No problem. Our account executives can guide you through the setup process and answer any questions you may have. We can also conveniently assist you in adding physical gold to your existing IRA or help you with an old 401(k) rollover.

Don’t wait for another recession to take a bite out of your holdings or for your dollars to buy less. Explore your options today.

Talk to an IRA advisor about how to roll over your 401(k) into a Gold IRA by opening a self-directed IRA account, contact us or call us at 800-341-8584 today.

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