According to an Invesco poll of central banks and sovereign wealth funds that was released on Monday, a growing number of nations are returning their gold holdings as a hedge against the kind of sanctions the West has placed on Russia.
As a result of the financial sector's collapse last year, sovereign money managers suffered large losses and are now "fundamentally" reevaluating their business plans in light of the persistence of rising inflation and geopolitical concerns.
The yearly Invesco Global Sovereign Asset Management Study polled 85 sovereign wealth funds along with 57 central banks, and more than 85% of them predicted more inflation during the next ten years than they did in the previous decade.
In that context, gold and bonds from emerging markets are viewed as safe bets, but the West's decision to freeze nearly half of the $640 billion from Russia in gold and foreign exchange assets as a reaction to its invasion of Ukraine a year earlier also seems to have precipitated a change.
According to the study, a "substantial share" of the central banks were worried about the historical precedent which had been established. According to over 60% of those respondents, it has increased the appeal of gold, and 68% of respondents choose to maintain their reserves at home, up from 50% in 2020.
One central bank, which wishes to remain unnamed, claimed that while they did possess the gold in London, they had now moved it back to their own nation to be held as an asset of protection to keep it safe.
That is a widely-held opinion, according to Rod Ringrow, head of formal institutions from Invesco, who reviewed the report.
He added that the catchphrase over the past year or two has made him think if it's his gold, he wants it in his own country.
Some central banks are being encouraged to move their assets away from the dollar due to geopolitical concerns as well as opportunities in emerging countries.
Although the majority continue to consider the dollar as the only viable choice as the reserve currency of the globe, an increasing 7% also think that the rising US debt is also bad for the dollar. From 29% last year, only 18% now consider the Chinese yuan to be a serious rival.
Geopolitical tensions are considered to be the greatest danger for the next 10 years by nearly 80% among the 142 institutions polled, while inflation is highlighted as a concern for the coming year by 83% of respondents.
The most appealing asset class today is infrastructure, particularly when it comes to initiatives that involve the production of renewable energy.
India continues to rank among the top investment destinations for a second year in a row due to worries about China, while nations like Mexico, Indonesia, and Brazil are benefiting from the "near-shoring" trend, which sees businesses create factories near their target markets.
In addition to China, Italy and Britain are viewed as being less desirable, and property is currently the least desirable private asset due to rising interest rates, work-from-home practices, and online purchasing habits that emerged amid the COVID-19 pandemic.
According to Ringrow, the wealth funds that outperformed the market last year were those who understood the dangers brought about by inflated asset values and were prepared to make significant portfolio adjustments. Moving ahead, it would remain the same.
He stated that the central banks and funds are now attempting to deal with higher inflation and a major sea change has occurred.