Central Banks Increase Gold Reserves and Diversify Storage

Goldman Sachs released a report identifying reserve diversification as the primary structural force driving gold prices. The analysis highlights a growing trend of central banks increasing their gold reserves while simultaneously diversifying where those assets are stored to avoid reliance on a single foreign custodian.

Official-sector purchases have accelerated, with central banks adding 57 tonnes of gold through over-the-counter markets in London and Switzerland. The Government of China purchased the majority of these reserves. Despite the shift toward diversification, a World Gold Council survey indicates the Bank of England remains the preferred custodian for 57% of reserve managers.

Beyond central bank activity, investor purchases have recovered since a mid-July bottom. This rebound is attributed to fading concerns regarding interest rate hikes from the Federal Reserve.