BCA Research is getting long gold as central bank gold demand supports higher prices

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Last week the World Gold Council amazed the gold market after it announced that central banks bought nearly 400 tonnes of gold in the third quarter. This was the biggest single quarter of purchases since the WGC started collecting data in 2000. "Central banks will continue increasing gold's share of their total reserves in the face of continued inflationary pressures going forward, heightened policy and geopolitical uncertainty," the analysts said."Of these pressures, the medium-term risk of persistently elevated headline inflation, which we expect will be driven by higher energy prices due to a lack of CAPEX, will dominate CB demand for gold.

This year the U.S. dollar has rallied 20%, hitting a 20-year high, driven by the Federal Reserve's aggressive monetary policy stance. According to many economists and analysts, the strong U.S. dollar has been a major issue for emerging market nations, which have their debt denominated in the greenback.

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