2025 Public Sector Perspectives

Natalie Tsui Public Sector Banking, Asia Alberto Torres Head of Public Sector Banking, LATAM Sunil Kaushik Head of Precious Metals Solutions, APAC The Changing Role of Gold in Central Bank Reserve Management I t has beenmore than 50 years since the US dollar was unpegged from gold. Nevertheless, it remains a key asset for central banks around the world. Gold’s attractiveness has recently increased against a backdrop of rising geopolitical and economic tensions. Will this continue and, if so, what are the implications for the distribution of gold around the world? Gold’s characteristics Throughout human history gold’s value has rested on several factors: • It is a precious metal that has an intrinsic value derived from its malleability and scarcity. It is used for ornamental, medical, and technological applications. • Gold shares most of the key features of fiduciary money (being able to store value and act as a means of exchange), except that it is not associated with any particular sovereign. It thus enjoys a reputation as a safe-haven asset during economic and political uncertainties, crises, or periods of inflation to preserve wealth. It has no credit or default risk. • It has a relatively low correlation to the US dollar (or other currencies), commodities, and most financial assets. Consequently, it often acts as an anchor within an investment portfolio, helping to preserve capital and provide security. • It has exhibited positive real returns over periods of both economic crisis and prosperity due to two uncorrelated sources of demand. About 55% of global demand is driven by jewelry and industrial/medical uses with the remaining 45% driven mainly by investment demand as a hedge against tail risks and inflation. 1 • It enjoys a deep and liquid market, with high daily turnover including a well-developed derivatives market. 1 https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2024 Michael Paulus Head of Public Sector Banking, Asia Tobias Cheung Public Sector Banking, Asia Citi Perspectives for the Public Sector 23