Banking giant UBS predicts that the demand for gold from central banks across the globe will experience an upsurge this year, as countries move away from the US dollar. A new report from UBS estimates that central banks will collect 700 metric tons (MT) of gold valued at $48.74 billion in 2021. The financial leviathan claims the flight from the US dollar is being caused by its weaponization.
UBS’s research indicates that the increased demand for gold this year will be mainly attributed to central banks wanting to protect themselves from any potential risks associated with the dollar. The banking giant believes that the weaponization of the US dollar is a major contributor to this shift in market attitude towards gold.
“Central banks have become wary of the potential risks from the weaponization of the US dollar and the growing geopolitical tensions, and have been increasing their purchases of gold as a form of diversification,” UBS wrote.
The banking institution further claims that gold now constitutes 22% of the global foreign exchange reserves. According to the World Gold Council, central banks purchased 651.5 MT of gold between July 2020 and March 2021. The report by UBS says this is part of the long-term trend of central bank gold purchases, accelerating over the last few years.