Central banks across the world purchased 387 tons of gold in the first half of the year amid a gloomy global economic outlook.
According to the Saxo Bank MENA Report, China was the biggest gold buyer, followed by Singapore.
Charu Chanana, a market strategist at Saxo Bank, pointed out banks consider gold a safe investment in the midst of global economic uncertainties.
The Singapore-based Chanana focuses on global macroeconomic fundamentals and monetary policy analysis.
Record-high purchase in 23 years
The World Gold Council (WGC) compiled the record gold purchases from January to June this year. It was the highest first-half total since WGC started compiling data in 2000.
Gold is a natural hedge against inflation and is among the most vital reserve assets of countries worldwide, experts say.
The move to boost dollar reserves was precipitated by several factors. According to Chanana, these include the slump in the dollar, the escalating war in Ukraine, a warning by Danish shipping and logistics group Maersk of a global downturn, a rise in crude oil prices, and an increase in global food cost last month.
Chanana said the crude oil market saw a sixth consecutive week of gains last week amid announcements of deeper cuts from Saudi Arabia and Russia and sharp declines in inventory.
Maersk, the world’s largest owner of container ships, has warned of a “longer and deeper” contraction in the global trade of up to -4 percent.
Ukraine war adding strain to the oil market
Furthermore, Chanana said the escalating war in Ukraine is adding a strain to the oil market, which is already faced with supply issues following Saudi Arabia’s extended 1mbpd production cut through September.
She explained that the war is putting Russia’s commodity exports through the Black Sea at risk.
The Black Sea route carries most of the grain exports. Additionally, about 15-20 percent of the crude oil that Russia sells daily to global markets pass through it.
Moreover, Chanana said the shipping and insurance costs will also likely be impacted.
Global food prices at an all-time high
Global food prices increased the most in the past year and a half as the El Nino weather phenomenon disrupted agricultural production. Russia’s departure from a crucial UN-backed agriculture deal also raised supply concerns.
Other factors affecting global food prices include the drought in Thailand, the second biggest rice exporter.
According to the United Nations Food and Agriculture Organization (UNFAO), the global food index averaged 123.9 in July. But the figure increased by 1.3 percent compared to the previous month. This was the largest monthly gain since March 2022.
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