Central Banks Favour Gold Over Dollar for Reserves, WGC Survey Reveals

Economic

Commodity

Summary:

A recent World Gold Council (WGC) survey shows that central banks are increasingly turning to gold as a key asset for their reserves, with a notable decline in reliance on the U.S. dollar...

Growing Demand for Gold Among Central Banks

According to the WGC's survey, central banks around the world are planning to increase their gold holdings over the next five years. This marks a significant shift, as 76% of the 73 central banks surveyed indicated that they expect to hold more gold, a rise from 69% the previous year. The survey, which was conducted between February 25 and May 20, also showed that nearly three-quarters of central banks believe their dollar reserves will decrease over the same period, a notable increase from 62% in 2024.

Central banks have consistently bought over 1,000 metric tons of gold annually in the last three years, a sharp rise from the 400-500 ton range in the previous decade. This trend reflects growing geopolitical and economic uncertainty, with central banks turning to gold as a more stable and reliable asset during volatile periods.

Gold's Performance Amid Crisis and Geopolitical Uncertainty

Gold's appeal has been strengthened by its performance during times of crisis, such as the geopolitical tensions following Russia's invasion of Ukraine. Since February 2022, gold prices have surged, hitting an all-time high of $3,500 per ounce in April 2025, marking a 95% increase since the war began.

For central banks, gold is not only seen as a hedge against inflation but also as an essential tool for portfolio diversification. These factors are prompting many central banks, particularly those in emerging markets, to prioritize gold accumulation.

Geopolitical Risks and Trade Conflicts Impacting Reserve Management

The WGC survey also revealed that 59% of central banks are concerned with potential trade conflicts and tariffs, which are influencing their reserve management strategies. Emerging markets, in particular, have been more vocal about these risks, with 69% of central banks in developing economies citing them as significant factors, compared to only 40% in advanced economies.

The survey confirmed that the Bank of England remains the preferred location for central banks' gold reserves. This further underscores the growing global trend of accumulating gold while reducing dependence on the U.S. dollar.

In conclusion, central banks are shifting towards gold as a safer, more stable asset amid rising global uncertainties. The WGC's findings suggest this trend is set to continue, with gold playing an increasingly pivotal role in global reserve management.

Source: Reuters

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Economic

Japan’s Debt Burden Meets Market Volatility

Japan’s debt-to-GDP ratio—currently around 250%, the highest among developed economies—has long been a structural vulnerability. While much of the debt is domestically held, recent developments have reignited concern. A combination of weak bond auction results, fading demand from traditional buyers like life insurers, and global investor apprehension about sovereign debt have sent yields on super-long JGBs surging. In particular, the 40-year yield jumped to a record 3.675%, with 30-year and 20-year bonds also hitting multi-decade highs.

This pressure is further magnified by the government's proposed fiscal stimulus ahead of July’s upper house elections, including potential cash handouts. These promises contribute to fears of worsening fiscal discipline.

BOJ's Cautious Retreat from Ultra-Loose Policy

The BOJ had been steadily reducing its monthly bond purchases—known as quantitative tightening—by 400 billion yen each quarter under a plan announced in July 2024. That pace will now be halved to 200 billion yen reductions per quarter starting in April 2026. For the current quarter, bond buying stands at 4.1 trillion yen per month.

This recalibration suggests a more gradual exit from monetary stimulus, aiming to avoid destabilizing markets. Governor Kazuo Ueda signaled that the bank is concerned about how super-long yield spikes could spill into shorter maturities, which have more direct effects on borrowing costs for households and businesses.

Shifting Investor Landscape and Fiscal Tools

The structural shift in demand is partly driven by regulatory-driven behavior. Life insurers, who were once major buyers of super-long JGBs to meet solvency needs, are now pivoting toward higher-yield assets. This transition has removed a major source of steady demand for long-dated bonds, leaving auctions vulnerable.

Moreover, the Japanese finance ministry is now taking a more active role. It plans to reduce the issuance of 20-, 30-, and 40-year bonds while increasing supply of shorter maturities. There are also discussions of introducing floating-rate debt and expanding bond access to unlisted companies and retail investors, aiming to deepen domestic demand and reduce dependency on volatile foreign inflows.

Geopolitical and Global Policy Backdrop

Japan’s bond market volatility does not exist in a vacuum. Global markets have turned cautious in the face of rising debt burdens across the U.S. and Europe. Moody’s recent downgrade of U.S. debt sent ripples through bond markets, amplifying scrutiny on countries like Japan with towering public liabilities.

Additionally, BOJ policy decisions are taking place amid escalating geopolitical uncertainty, particularly in the Middle East and with U.S. trade tariffs. These risks reinforce the bank’s preference for stability over aggressive policy tightening.

Market Confidence and Key Test Ahead

The next major milestone will be the 20-year JGB auction on June 24, which will test whether recent measures to calm markets are working. The BOJ’s message is clear: while it aims to unwind stimulus and control inflation, it must do so without jeopardizing market confidence or fiscal credibility.

Ultimately, the BOJ’s recalibrated taper reflects a delicate balancing act. It must juggle inflation control, market stability, and the government’s mounting fiscal obligations—all while navigating a shifting global investment landscape and fragile investor confidence in long-term Japanese debt.

Source: Reuters

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Economic

Bullish Momentum Returns to Asia

From June 6 to June 12, hedge funds rapidly ramped up their activity in Asia, marking the largest volume surge in over five years, as revealed in a Goldman Sachs report published Friday and reviewed Tuesday by Reuters. During this period, net long positions surged, with bullish trades decisively outweighing bearish bets. The increase in buying suggests renewed conviction in Asia's growth potential.

Notably, funds increased exposure to equities in Japan, Hong Kong, Taiwan, and India, while taking short positions in onshore Chinese stocks — suggesting selective confidence tied to geopolitical and macroeconomic undercurrents.

Trade Talks and Elections Boost Sentiment

This renewed investor enthusiasm coincides with high-level trade talks between the U.S. and China in London, which have sparked optimism of a thaw in tensions that have weighed on global supply chains and capital flows. Furthermore, South Korea’s recent election of a market-friendly president has injected fresh confidence, catalyzing foreign inflows into Korean equities.

The MSCI Asia-Pacific Index has reflected this enthusiasm, climbing 2.5% in June alone, led by Korea and Taiwan. Since April 7, the index has risen 24%, buoyed by a 90-day tariff moratorium from the U.S. and stronger-than-expected corporate earnings across the region.

Rotation From Dollar Assets to Asia

Goldman Sachs also noted that the share of developed Asia markets in total hedge fund exposure hit 9%, placing it in the 94th percentile historically. This rotation is partly explained by the global trend of de-dollarization, as weakening expectations for the U.S. dollar lead funds to seek alternative regional opportunities. According to Kier Boley, CIO at UBP Alternative Investment Solutions, international investors are re-evaluating previously overlooked markets like Asia in light of shifting macroeconomic dynamics.

While risks remain, especially in China where structural challenges persist, the momentum in Asia’s equity markets underscores a broad shift in hedge fund sentiment. If trade negotiations continue progressing and political stability strengthens across key Asian economies, this could mark the beginning of a more sustained capital rotation into the region, positioning Asia as a new center of post-tariff investment optimism.

Source: Reuters

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Economic

BOJ Holds Steady, Prioritizes Stability Over Aggression

At the conclusion of its two-day policy meeting, the BOJ confirmed expectations by maintaining its short-term interest rate at 0.5%, reaffirming its gradual approach to tightening monetary policy. The central bank also announced that it will slow its bond tapering process from April 2026 onward, aiming to reduce monthly bond purchases by 200 billion yen per quarter. By March 2027, total monthly purchases are projected to decline to approximately 2 trillion yen.

This decision leaves the current tapering plan in place through March 2026, suggesting that any aggressive rollback of stimulus is off the table for now.

Gradual Normalization Amid Global and Domestic Pressure

The BOJ's cautious approach highlights its concerns over both external risks—such as Middle East tensions and U.S. tariff actions—and domestic uncertainties like wage growth and inflation trends. While Japan has seen inflation hover just above the 2% target, Governor Kazuo Ueda has signaled the need for stability before initiating any substantial tightening.

The Japanese bond market has experienced volatility, particularly in ultra-long government bonds (JGBs), prompting the central bank to ease the pace of normalization to avoid destabilizing the market. By carefully phasing its taper over multiple fiscal years, the BOJ appears focused on protecting bond yields from sudden spikes, which could impair fiscal sustainability and investor confidence.

Market Reaction and Outlook

Markets reacted moderately to the announcement. The 10-year JGB yield inched up to 1.465%, while the yen remained flat at 144.80 per dollar, indicating limited surprise. Investors now await Governor Ueda's 3:30 p.m. (0630 GMT) press conference, where further guidance may be offered on future rate hikes or taper adjustments.

Overall, the BOJ continues to strike a delicate balance: acknowledging inflationary pressure without undermining financial market stability or derailing Japan’s still-fragile economic recovery. Further moves, particularly any interest rate increases, are likely to hinge on geopolitical developments, wage trajectories, and global central bank trends.

Source: Reuters

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Economic

Bangkok Races Against Time as Tariff Moratorium Nears Expiry

In a move to prevent a potentially damaging tariff increase, Thailand announced it will submit a formal trade proposal to the United States within the week. The country faces the risk of a 36% tariff on its exports if the current moratorium, which shields Thai products from punitive duties, is not successfully renegotiated before its July expiration.

Finance Minister Pichai Chunhavajira stated on Tuesday that technical-level discussions will begin online this week, with the formal proposal aligned with pre-announced trade criteria. These include addressing trade imbalances, enhancing U.S. market access, and preventing transshipment violations, while also encouraging Thai investment projects that generate employment in the U.S..

Digital Diplomacy to Lead the Way

According to Pichai, the first phase of negotiation will be conducted virtually, and any face-to-face meetings will be considered based on progress in the preliminary rounds. This approach underlines the urgency of maintaining diplomatic momentum while navigating logistical challenges.

Thailand’s earlier informal proposal, submitted in May, emphasized collaborative economic measures that benefit both sides. The formal version, to be submitted after this week’s talks, is expected to provide more concrete commitments to rebalance bilateral trade and support U.S. economic interests.

Strategic Context: U.S. Trade Pressure and Thai Economic Priorities

This development comes amid broader U.S. efforts to tighten trade rules and enforcement, particularly in Southeast Asia, to combat transshipment and protect domestic industries. Thailand, a significant exporter of electronics, automotive parts, and apparel, could suffer substantial economic setbacks if subjected to steep tariffs.

For Bangkok, avoiding the tariff is not only an economic imperative but a geopolitical one, as it seeks to remain a stable U.S. trade partner while balancing its ties with regional giants like China. The Thai government is also under domestic pressure to maintain export competitiveness and economic stability amid global uncertainty.

With the July deadline approaching fast, the success of these talks may depend on how convincingly Thailand can demonstrate compliance, reciprocity, and economic alignment with U.S. trade priorities.

Source: Reuters

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Economic

Policy Hold Signals Caution in Unpredictable Climate

At its June 2025 meeting, the Bank of Japan (BOJ) voted unanimously to leave short-term interest rates at 0.5%, aligning with expectations but reinforcing a notably cautious stance in the face of complex global headwinds. Despite persistent inflation and calls for normalization, the BOJ opted to maintain its gradual and calculated approach — announcing it will slow the pace of its quantitative tightening (QT) in fiscal year 2026 rather than aggressively unwind its decade-long stimulus program.

This move comes as Japan grapples with a fragile domestic bond market, international trade disruptions from fresh U.S. tariffs, and heightened geopolitical tension following escalations in the Middle East. The BOJ's balance sheet remains near the size of Japan’s entire economy, highlighting the risks of an abrupt policy pivot.

Investor Reaction: Measured and Watchful

The initial market response was largely subdued. The 10-year JGB yield rose modestly by 1.5 basis points to 1.465%, while the yen traded flat at around 144.80/USD. Analysts generally interpreted the BOJ’s tone as one of caution, aimed at preserving market stability without prematurely tightening financial conditions.

Strategists such as Norihiro Yamaguchi of Oxford Economics stressed that the BOJ’s hesitation to hasten bond reduction reflects sensitivity to volatility in super-long-term Japanese government bonds, which if left unchecked, could spill into shorter durations and disrupt broader economic momentum.

Similarly, Fukuoka Financial Group’s Tohrū Sasaki suggested that uncertainties related to global tariffs and Middle East conflicts have given the BOJ a convenient rationale to delay further tightening, likely pushing any rate hike beyond 2025.

Yield Curve and Inflation Dynamics Still Under Watch

Despite the cautious tone, the central bank is not entirely passive. Miki Den from SMBC Nikko noted the BOJ’s subtle shift — reducing bond purchases for maturities under 10 years while maintaining support for longer maturities, hinting at an intention to gradually let market forces play a greater role in price discovery.

Khoon Goh of ANZ echoed the inflation concerns, noting that the yen’s weakness and rising oil prices, especially under the current geopolitical strain, will likely continue to pressure Japan’s import-reliant economy. This could complicate the BOJ’s stance if cost-push inflation persists and real wages stagnate.

However, many observers, including Nomura’s Kota Suzuki and Sumitomo Mitsui Trust’s Katsutoshi Inadome, believe the BOJ remains effectively paralyzed in the near term — unable to raise rates due to global and domestic uncertainties, yet hesitant to inject further liquidity unless absolutely necessary.

Strategic Outlook: A Predictable Exit, Not a Hawkish Pivot

With the quarterly bond-buying pace of 400 billion yen remaining until April, the BOJ reaffirmed its long-term plan to exit ultra-loose policies steadily. This strategy appears consistent with Governor Kazuo Ueda’s intent to hand control back to market participants while carefully monitoring any signs of destabilization in rates or inflation expectations.

In the context of a potentially prolonged Middle East conflict, uncertain trade policies from the U.S., and structural weaknesses in Japan’s labor market, most analysts now push back expectations for another BOJ rate hike to October at the earliest — if at all in 2025.

Ultimately, the BOJ’s decision reflects a broader pattern among major central banks: one of tempered policy normalization under the shadow of global shocks. While Japan’s inflation remains above target, the BOJ seems determined not to let domestic tightening spark broader financial distress — a delicate balance that will define its credibility in the months ahead.

Source: Reuters

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Economic

Cryptocurrency

A Milestone for U.S. Crypto Legislation — But Not Without Political Friction

On Tuesday, the Senate is expected to approve the GENIUS Act — short for Guiding and Establishing National Innovation for U.S. Stablecoins — marking the most significant move yet toward formal crypto regulation in the U.S. The legislation, focused on establishing a framework for consumer protections and market guardrails for stablecoins, received bipartisan support but not without controversy.

Although 18 Senate Democrats crossed party lines to support the bill alongside the Republican majority, a large portion of the Democratic caucus expressed deep reservations. Chief among them is the bill’s omission of any restrictions on presidential holdings in crypto-related ventures, which critics argue leaves the door wide open for personal profiteering — particularly by President Donald Trump.

Trump’s Crypto Empire Raises Ethics Flags

At the center of the criticism is Trump’s financial involvement in World Liberty Financial, a company tied to a newly launched stablecoin (USD1) and other crypto ventures. Trump’s family reportedly holds significant equity in the project, which has garnered attention following a private fundraising dinner hosted by Trump himself. These ventures coincide with Trump’s policy support for rapid crypto integration into the U.S. economy.

While the GENIUS Act prohibits members of Congress and their families from profiting off stablecoin investments, that clause does not apply to the president or their relatives, a detail drawing condemnation from key Democrats. Senator Elizabeth Warren, one of the bill’s most vocal opponents, described it as a “super highway for Trump corruption,” warning that it opens the floodgates for political enrichment under the guise of market regulation.

Crypto Industry Sees Bipartisan Victory Amid Ethical Storm

Despite the political tension, major crypto players — including Coinbase CEO Brian Armstrong — have hailed the bill as a victory for innovation and legitimacy. Armstrong has met with Trump directly and voiced support for the administration’s openness to digital assets. Coinbase even co-sponsored a recent Army anniversary parade in Washington, coinciding with Trump’s birthday and further intertwining crypto influence with political branding.

The Treasury Department also supports the bill’s economic potential. Treasury Secretary Scott Bessent recently projected that clear regulatory pathways could propel the stablecoin market past $2 trillion by 2028, a forecast that fuels investor enthusiasm even as watchdogs call for tighter governance.

Legislative Outlook: More Challenges Ahead

Though Tuesday’s vote is expected to clear the Senate with a simple majority, the road to enactment remains complex. The Republican-led House must now review the bill, where lawmakers may attach broader market structure provisions. If that happens, the revised bill could face new hurdles back in the Senate.

Nevertheless, Trump has publicly pushed for final legislation on his desk before the August congressional recess, indicating that crypto remains a key priority for his administration — both politically and economically.

Regulation or Opportunity?

While the GENIUS Act is hailed as a foundational step for the digital asset economy, the broader implications of presidential financial entanglement in emerging sectors like crypto remain unresolved. For critics, the bill sets a dangerous precedent of selective ethics. For supporters, it signals America’s belated but essential embrace of blockchain-based finance.

As the House prepares to deliberate, the next round of negotiations will determine whether the bill stays a narrowly targeted crypto framework — or becomes the opening act in a larger battle over political integrity and digital economic sovereignty.