If you thought gold’s run in the past five years was extraordinary, delivering a 177% return (1), brace yourself for the next five.
Since 2020, the value of gold has soared (2) from $1,585 per ounce to more than $4,500 per ounce.
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Now, German investment bank Deutsche Bank predicts it will nearly double to $8,000 per ounce by 2031.
In a research note published April 27, Deutsche Bank strategist Mallika Sachdeva and research analyst Michael Hsuah observed that China, Russia, India and Turkey and central banks in emerging markets are all stockpiling (3) gold.
This includes central banks in Kazakhstan, Saudi Arabia, Qatar, Egypt and the United Arab Emirates.
As The Northern Miner reports (4), since the 2008 financial crisis, these central banks have collectively increased their total bullion reserves to more than 225 million oz.
According to the Deutsche Bank’s modelling (5), if their collective gold holdings hit 40% of total reserves, gold could hit $8,000 an ounce.
In other words, demand from these institutional buyers is driving gold prices higher. Here’s why they’re stockpiling the precious metal.
Researchers predict a new world order with gold on top
Sachdeva and Hsuah observed a common thread among many of the countries stockpiling gold: vulnerability to Western trade sanctions.
They argue that at the very same time these countries’ central banks have been increasing their gold reserves, they’ve been reducing their U.S. dollar reserves as a way to achieve independence from those sanctions.
“The dollar banking system has been weaponized,” Sachdeva and Hsuah write.
The researchers predict a new world order in which gold — not the U.S. dollar — will be the monetary anchor.
The trend toward central banks increasing their bullion reserves is certainly not slowing.
Last year, the World Gold Council surveyed (6) central banks around the world about their intention to buy gold. As Mining.com (7) reports, 76% said they planned to increase their gold reserves in the next five years and a similar number (73%) said they’d be reducing their U.S. dollar reserves.
The majority said buying gold was a good way to hedge against the impact of interest rates, inflation and geopolitical instability. So if central banks are doing it, should you?
