gold, page-30252

Why do Central banks hold gold?
If you want to hand pick a time frame then you can make any investment look bad. You need to look at the longer term for a realistic comparison.

One of the more liquid options for central banks is US Government bonds. Many governments have big holdings in either US or other countries govt bonds. Any central bank that diversified from govt bonds to gold over the long term would actually have done very well even after factoring in the last 7 years decline. Many Central banks are generally long term holders.
The chart below shows US 10 year bonds have halved over the last 10 years and done much worse over 20 years. Most other govt bonds with varying maturities don’t look that much better. You needed to be in very short maturities with lower yields to reduce those losses. Compare that to gold.
For the US, gold is up 89% over 10 years. That's not a bad return at all and it certainly out performs US bonds over 10 years or 20 years. In fact the gold charts below only go back 10 years. If we go back further, the returns for gold were much stronger. Go back 17 years and the gold price rose from around $250 to $1250 now. Compare that to bonds.

For countries outside the US, gold has been much stronger again over the last 10 years. For Australia it was 137% and for Europe it was 128%.

Yes there have been stronger performing investments than gold but diversifying in gold from the largest market of all - bonds for central banks would have been a good investment not a loss maker. In fact if you want to look at some of the best performing investments of any markets, you can find some among our gold producers such as NST, EVN and over shorter periods have a look at SBM from its lows of a few years ago.