Gold is winning against the dollar as nations manage global strife. Deutsche Bank sees bullion prices surging

Central banks' increased preference for gold as a proportion of their reserves means the precious metal has more room to rise, according to Deutsche Bank. Gold's share of central bank reserves has tripled to 30% today versus the 1990s as monetary policymakers seek hedges against geopolitical turmoil, strategist Mallika Sachdeva said in a report published Monday. The percentage share of U.S. dollars in foreign central bank reserves has fallen to 40% from more than 60%. "The fact that the gap between the dollar and gold as a share of reserves is now just 10% is extremely notable," Sachdeva said. Central banks appear to be reversing the trend seen in the 1990s when they shifted exposure away from gold and toward the U.S. dollar, according to the London-based strategist. Sachdeva acknowledged that about 80% of the rise in gold's share of central bank reserves is due to price appreciation rather than new purchases. Gold last year posted its strongest annual gain since 1979 — ironically, the year of the Iranian revolution — and is now up more than 40% in the past 12 months. @GC.1 1Y mountain Gold futures, 1-year But Sachdeva said central bank purchases nonetheless account for a significant share of the gain in reserve holdings, and that oftentimes its central bank purchases that are contributing to higher gold prices. "Volume and prices are thus endogenously related and are both doing the legwork of gold's rising share," Sachdeva said. …