Gold finished up 18% in US dollar terms in 2019. That was its best annual performance since 2010, when demand surged for safe assets in the wake of the global financial crisis. One source of demand in 20109 was a 50-year high in central bank buying.
Central banks in Russia and Turkey continued to ‘de-dollarize’ and add gold. They were joined by central banks in Poland and Hungary (who are repatriating their gold from vaults in London).
One interesting side note about the demand for physical gold from governments in Eastern Europe is that they don’t fear a Russian invasion. Seriously. If you thought the Russians would roll tanks across the border to Budapest and Warsaw you’d keep your gold in London or New York.
Aside from where you’re storing your gold, though, the big question here is why central banks are accumulating gold even as most of them continue to cut interest rates and intervene in credit markets. Could it be that gold is the ultimate reserve asset? And if the banks are buying it, shouldn’t you be too?