Beyond inflation, gold serves as a safeguard during times of economic instability, including recessions, geopolitical conflicts, and financial crises. Its unique characteristics make it an appealing asset when confidence in governments and financial systems erodes.
3.1 Central Banks and Gold Reserves
Many central banks hold significant reserves of gold as a way to stabilize their economies. These reserves act as a buffer against currency devaluation and financial crises.
- Diversification of Reserves: Central banks diversify their reserves by holding gold alongside foreign currencies to reduce risk.
- Gold’s Role in Monetary Policy: In times of economic crisis, central banks can use their gold reserves to support their currencies or pay off debts.
As of recent years, countries like Russia, China, and India have increased their gold reserves to reduce reliance on the U.S. dollar and protect against global economic instability.
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