Who upholds the surging gold price? The role of the central bank worldwide

Who upholds the surging gold price? Conventional wisdom suggests that the depreciation of the exchange rate, inflation and economic turmoil are the suspects. Nonetheless, while these factors cease, why does the gold price still stay around hikes? The gold market belongs to a global arena. Different from other commodities, its participants include the national central banks worldwide. However, surprisingly, the role played by these tremendous market participants' gold holdings on the gold price has been ignored in past empirical works. This research focuses on central banks' gold holdings to explore who upholds the surging gold price. Several interesting outcomes are derived. First, our empirical evidence shows an inverse phenomenon relative to news reports from the mass media that the gold holdings of central banks worldwide in fact continuously descend. Second, the mainstream countries of the world have not played a main role in the rising trend of the gold price in the recent decade; instead, newly emerging industrialized countries' central banks' gold holdings show their significant power in explaining causality to gold price fluctuations. Third, the reason for the persistent gold buying behaviour of emerging economies may be because the increase in the gold price delivers a kind of short squeeze effect to the central banks of emerging countries.