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Cailianshe News, July 24 (Editor: Bian Chun)This year, due to multiple factors such as the Fed's interest rate cut expectations and geopolitical tensions, the international gold price has hit new highs and is currently trading at a level close to its historical high. Considering that the demand for gold in many countries around the world remains strong, this precious metal is expected to continue to "shine" in the future!

At present, many African countries are eager to build up gold reserves to hedge against the risks of currency depreciation and inflation caused by geopolitical tensions. Countries such as South Sudan, Zimbabwe and Nigeria have either taken measures to increase their gold reserves or are considering doing so.

African countries have been hardest hit by supply chain disruptions caused by the coronavirus pandemic and the conflict between Russia and Ukraine, as well as currency sell-offs and rising inflation caused by a sharp rise in global interest rates. Geopolitical tensions have risen again with the conflict in Gaza, trade conflicts and concerns about the impact of Trump's return to the White House.

South Sudan's central bank governor, James Alic Garang, reiterated over the weekend that the country plans to expand its asset reserves by adding gold.

The Central Bank of Uganda plans to buy gold directly from miners to mitigate "declining foreign exchange reserves and address related risks in international financial markets."

Nigerian lawmakers have suggested the central bank use gold to support and stabilize its currency, the naira, and mitigate inflation risks. The currency of Africa's most populous country is the world's worst performer against the dollar this year, second only to the Lebanese pound, partly due to a devaluation aimed at freeing the naira.

Last year, Madagascar's central bank began buying gold domestically as revenue from vanilla exports dwindled. In June, Tanzania said it would spend $400 million to buy 6 tons of gold. Zimbabwe tried issuing gold coins for the first time in 2022 and launched a gold-backed currency in early April to help curb spiraling inflation and exchange rate volatility.

Previously, central banks in Asian countries such as India have stockpiled gold to diversify their reserves and reduce their reliance on the US dollar.

According to a recent survey by the World Gold Council (WGC), about 20 central banks are expected to increase their gold reserves in the coming year, the highest level since the association began its gold reserve survey in 2018.

Shaokai Fan, head of global central banks at the WGC, said that over the past two years, the association has been working with central banks to develop domestic purchase programs for small miners. Central banks can use their own currencies to buy gold to increase reserve assets without sacrificing other hard currency reserves.

"There is some truth to buying gold as a diversification strategy," said Charlie Robertson, head of macro strategy at asset manager FIM Partners. "While holding gold does not pay interest, unlike holding U.S. Treasuries, it doesn't matter because the price of gold has risen so much. It's a profitable trade."

Hasnain Malik, emerging markets equity strategist at Dubai-based research firm Tellimer, noted that the rush to gold does not mean that people expect gold and silver to become a "liquid substitute" for the dollar, but for countries that believe that gold prices will rise and the dollar price will fall, or whose access to dollars may be impaired by sanctions, it may make sense to increase the allocation of gold in their reserves.

Since the beginning of this year, the international gold price has risen by nearly 20% and is currently trading above $2,400. Last week, the gold price broke through $2,470/ounce, setting a new record high. Analysts believe that it is highly likely that the gold price will rise further and break through the $2,500/ounce mark.