Plans by a number of central banks to change the composition of their foreign exchange reserves and limit the share dollar in my portfolio made them dizzy gold markets during the past year. This was preceded by the US decision to “freeze” Russia’s dollar holdings, a decision that blocked Moscow’s access to much of its wealth. This is indicated by market analysts interpreting the decision of central banks to continue the largest purchases of gold in the last 55 years last year. Central banks alone bought 1,136 tons. Total international demand for the precious metal increased by 18% in 2022 to reach 4,741 tons, the highest level since 2011.

In short, central banks wanted to reduce their reliance on the dollar to protect themselves from similar US moves against them.

In the second half of last year, gold purchases from central banks they reached a historical record, while only in the last quarter of last year their purchases reached 417 tons. This is about 12 times more than what central banks bought in the same period last year. Among them stands out the case of Turkey, which last year was the first in gold purchases among central banks and, according to estimates, bought about 400 tons. In Turkey, however, increased demand for gold was not limited to the central bank as households rushed to buy up the precious metal to hedge against geopolitical uncertainty and runaway inflation hovering around 85%. The central bank’s gold holdings hit a record high of 542 tons, according to the World Gold Council. This level is increased by 148 tons. Demand for jewelry in the neighboring country also rose, up 32% year-on-year in the fourth quarter of 2022. And, as the World Gold Council points out, despite the rise in the local gold price in the fourth quarter, protecting households from rapidly rising inflation has clearly been a driver of investment.

Global demand for this metal jumped 18% last year to 4,741 tons.

Turkey has stepped up its gold production ambitions more than the current average of 35 tons per year over the past five years. After all, Turkish President Recep Tayyip Erdogan mentioned this last week when he pointed out that “along with oil, gold is one of the commodities that we import in large quantities” during the opening of a new gold mining facility in western Turkey. a country. At the same time, China bought 62 tons of gold in November and December, and the countries of the Middle East also made important purchases.

Along with central bank buying, demand for gold from retail investors soared to a nine-year high. Heightened demand for the brightest of the precious metals has prevented its price from dropping further from $2,000 an ounce last March to less than $1,600 an ounce in November. The reason for the decline in its price is the increase in interest rates, which convinced investors to abandon gold and turn to investment products, since they can bring them significant profits after the increase in interest rates. Since gold is not profitable, the metal becomes more attractive to investors in times of low interest rates. Over the past three months, the price of gold has jumped and is now trading at $1,945.30 an ounce.