On 17 April at 12:00 you are invited to attend the research seminar of the School of Economics and Business Administration of the University of Tartu in which Ewa Stawasz-Grabowska (University of Lodz) will present the research project “Gold Renaissance among Central Banks: Can Gold Reserves Reduce Countries’ Sovereign Credit Risk?”.
The main objective of the chapter is to fill the research gap by theoretically and empirically investigating the motives behind the gold renaissance among central bank in light of the recent increase in their purchases, which peaked in 2022. The reasons for gold purchases are intertwined, having both geopolitical and economic origin, and one of the drivers of gold accumulation may be the need to reduce countries’ sovereign credit risk especially of emerging markets. Higher central bank gold reserves, may be perceived as a symbol of conservatism due to safe-haven property of gold and its inflation hedge attributes. Motivated by theoretical considerations, we empirically analyze whether higher central bank gold holdings are found to reduce sovereign risk as measured by 10-year government bond yields in countries that accumulated the highest amount of gold. This study was carried out during the nineteen-year period 2004–2022, which encompassed the global financial crisis, COVID-19 pandemic, and Russian invasion of Ukraine. The results suggest that central bank gold reserves can reduce sovereign credit risk. This effect was stronger during 2022, when central bank gold purchases hit record high amid soaring inflation and increased geopolitical tensions.