Gold is shining once again as central bankers go on a buying spree

Gold has lately been in the spotlight.

And how!

Its price has risen 11% from the lows of end-September 2018

Central banks across the globe have been buying larger quantities of the precious metal, a phenomenon not been seen since 1971.

They added 651.5 tonnes to their treasure chests in 2018, a 74% increase over the previous year, according to a World Gold Council (WGC) report.

Emerging markets (EMs) such as Russia, Turkey, Kazakhstan and Poland have been big buyers of gold last year, according to the WGC report.

The ongoing trade war between the US and China has heightened global uncertainty. Hence, gold becomes a useful hedge for most countries. Globally, gold prices move inversely compared to the US economy and the dollar. If the trade disputes get out of hand, and if there’s stress in the global economy, naturally, the dollar will appreciate. Conversely, emerging market currencies could be at risk. So, anyone would like to hold gold against currency volatility, including central banks  Global trade wars are giving rise to another phenomenon—countries are increasingly resorting to trading among themselves through bilateral agreements. As a result, the dollar trade is now shifting to bilateral currency-based trades. This reduces the need for countries to hold dollar reserves. Emerging M currencies fell against the dollar last year, these economies particularly benefited from holding gold. “If you were holding gold in Turkey or Argentina last year or Brazil and Russia, and even India, you would have obtained fantastic returns in local currency terms