In a recent survey, central bank reserve managers have identified geopolitical conflicts as the main threat to the global economy, despite an overall positive economic outlook.
What Happened: The UBS Asset Management survey, which included 40 top central banks managing over $15 trillion, found that 87% of the reserve managers identified an increase in geopolitical conflicts as the biggest risk to a favorable economic outcome, Reuters reported on Thursday. This concern is driving 41% of the managers to diversify their investments across different regions and currencies, in anticipation of escalating tensions between the U.S. and China.
Gold has been a significant beneficiary of this diversification, with its price reaching record highs. The survey revealed that 24% of respondents increased their gold exposure in the past year, and 30% plan to do so in the upcoming year.
“The recent political decision to use profits from central banks of Russia's frozen assets to finance Ukraine raises further the risk that FX [foreign exchange] reserves are no longer seen as a safe haven for central banks,” stated Massimiliano Castelli, head of strategy and advice at UBS Asset Management.
The survey also highlighted that the upcoming U.S. election could exacerbate tensions, with 94% of respondents predicting a further deterioration in U.S.-China relations if Donald Trump wins.
Why It Matters: The global economy has shown signs of resilience, with the Organization for Economic Cooperation and Development (OECD) revising its 2024 growth forecast upwards, indicating a potential escape from a stagflationary rut. The U.S., China, and India are among the countries contributing to this improved outlook.
China’s significance in the global economy is growing, accounting for 19% of the global GDP and 48% of Asia's GDP. This makes it a crucial player in the global economy, significantly impacting industries worldwide.
Furthermore, artificial intelligence (AI) and cryptocurrency could collectively contribute $20 trillion to the global economy by 2030, adding to the global GDP. This intersection of AI and crypto is expected to have a more substantial impact than anticipated.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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