Central banks have turned into a major support pillar for gold, expanding their reserves of the metal this year for the first time since 1988.
The banks will buy a total of 13.8 million ounces for $15.5 billion this year, research firm CPM Group told Bloomberg.
Gold has surged to a record high above $1,200 an ounce amid concern about global government debt burdens and inflation.
Central banks of India, China and Russia account for some of the biggest purchases. Sri Lanka bought 10 metric tons last month.
“Gold is a good anchor and hedge to have in these volatile circumstances,” Sri Lanka’s Central Bank Governor Nivard Cabraal told Bloomberg.
Many gold bulls see the precious metal as an alternative to paper currencies, which can fall victim to inflation.
“Central banks recognize the economic crisis could linger,” William O’Neill, a partner at Logic Advisors, told Bloomberg. “Gold has assumed the front and center position as the alternative currency.”
Individuals have turned bullish on gold too, snapping up the metal like there’s no tomorrow. Sales of American Eagle coins hit a 10-year peak of 1.19 million ounces in the first 11 months of the year. That’s an increase of almost 75 percent over the same period last year.
The British department store Harrods now offers small and large gold bars. “Sales are ahead of our expectations,” Chris Hall, Harrods’ head of gold, told the Financial Times.
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