Central banks are on the biggest gold buying spree in decades

The biggest central bank purchases in a half century and European investors search for a haven helped increase gold demand last year, according to the World Gold Council.

Global gold demand rose 4 percent to 4,345.1 tonnes as central banks bought the most since the U.S. severed the dollars peg to bullion in 1971 in a bid to diversify holdings. Bar and coin purchases also gained and European investors stepped up exchange-traded fund buying, partly amid political uncertainty.

Worries about a slowdown in global growth, heightened geopolitical tensions, and financial market volatility supported gold demand, said Alistair Hewitt, head of market intelligence at the World Gold Council. I don’t see any of the risks that investors and central banks are worried about fading any time soon, and I expect gold to remain an attractive hedge in 2019.

Gold prices ended 2018 little changed, but rallied toward the end of the year amid concerns about Brexit, a falling stock market and expectations for a less aggressive US monetary policy. The trend has continued this month, with bullion climbing to the highest since May.

While gold investment has benefited from a weaker economic outlook, China’s slowdown and higher prices have started to hurt jewellery demand there. Purchases fell in the fourth quarter, and will likely face further headwinds, Hewitt said. For central banks, countries like Russia and Kazakhstan should continue buying gold, while ETFs are likely to see more inflows, he said.

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