Central banks around the world

are turning their backs on the dollar and opting instead of the dollar for gold reserves, which have not stopped growing in recent decades

In fact, assets in gold in 2021 reached their highest value in 31 years, according to analysts consulted by the Japanese daily Nikkei Asia.

Data from the World Gold Council, an international gold industry research organization, corroborate these claims.

Thus, according to the organization, central banks have increased their precious metal reserves by more than 4,500 tons in the last decade.

In September alone, reserves amounted to some 36,000 tonnes, the highest since 1990 and 15% more than in the previous decade.

Whereas in the past large gold acquisitions were a matter for the central banks of large countries like Russia, now more and more developing states are buying large quantities of gold.

Gold holdings started to increase around 2009. Until then, central banks and other public institutions used to sell it to increase dollar-denominated assets.

Given that the United States enjoyed a buoyant economy in the 1990s as the sole superpower after the end of the Cold War, the benefits generated by dollar-denominated assets were attractive to other countries, experts say.

The 2008 crisis and the exit of the dollar

Experts note that the value of the dollar against gold has fallen dramatically in the last decade, as large-scale monetary expansion has continued to drive the supply of the US currency.

Although the US Federal Reserve has made clear that it is ending its easy money policy and has projected that it will start raising interest rates in 2022, several central banks, especially in emerging economies, continue to bet on gold, which reflecting global concern about the dollar-based monetary regime.

Thus, in the first nine months of 2021, Thailand bought about 90 tons of the precious metal, India 70 tons and Brazil 60 tons.

The 2008 global financial crisis led to an outflow of funds including from US public debt, causing the value of dollar-denominated assets to fall.

Confidence in these assets "faltered," said market analyst Itsuo Toyoshima.

After the crisis, long-term interest rates in the US fell as a result of large-scale monetary expansion, which made holding assets denominated in US currency less advantageous.

Central banks in low-credit emerging economies began to "protect their assets with gold," explained Koichiro Kamei, a precious metals and financial analyst.

The dollar's share of foreign exchange reserves is shrinking, in contrast to the growth of gold.

In 2020, the dollar's share of international reserves fell to its lowest level in a quarter of a century.

(With information from Sputnik Mundo)