Central banks have become major buyers of gold, accounting on average for about 10% of total gold demand over the past five years. The primary driver of central banks’ gold buying continues to be diversification away from the US dollar with some also looking for a hedge against currency volatility more generally. In this Precious Metals Watch we argue that the official sector will remain a net buyer of gold for the foreseeable future and that the additional demand will help to set a floor under the gold price.
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