Gold has lately been in the spotlight. And how! Its price has risen 11% from the lows of end-September. 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.
So, what gives? 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. Gold then becomes useful as a safe-haven contra strategy.
Besides, EM countries are expanding their balance sheets to include other assets. After US Treasuries, gold stands best placed for diversification, say analysts. It is reasonably liquid and a global store of value.
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