Despite the savage losses incurred as gold prices plunged earlier this year, global central banks still desire gold, supporting precious metal prices and exchange traded funds.
According to the World Gold Council, central banks hold 18% of the gold every mined and will add another 350 tons, or $15 billion worth, this year, Bloomberg reports.
In 2012, central banks acquired 535 tons, the most since 1964.
However, gold prices have been faltering so far this year after a 12 consecutive-year rally. Gold has declined about 21% so far in 2013, the largest decline since 1981.
Gold futures were trading around $1,324 per ounce Tuesday. [Early Signs US Fiscal Impasse May Not Be Ignored Much Longer]
Central banks have been known to mistime gold investments, buying high and selling low, as a way to shield economies from inflation. Fed Chairman Ben Bernanke described gold as an asset rather than money and pointed out that central banks own bullion as a “long-term tradition.”
“Central bankers have typically bought when you probably should be selling and selling when you probably should be buying,” Michael Strauss, chief investment strategist and chief economist at Commonfund Group, said in the article. “It’s going to be a difficult market and sometimes the price of gold is driven by emotions rather than fundamental factors. Central banks have been bad traders of gold.”