Central banks and sovereign wealth funds have become key players behind the recent surge in gold prices, quietly amassing unprecedented levels of the precious metal. While much of their activity remains undeclared, market analysts estimate that these institutions are now purchasing around 80 metric tons of gold each month—valued at approximately $8.5 billion.
According to Goldman Sachs, the cumulative impact of this steady accumulation is a major factor behind the ongoing bull market. The World Gold Council estimates that central banks and sovereign wealth funds are collectively buying more than 1,000 tons annually, accounting for at least a quarter of total global production. A January survey by HSBC found that over a third of central banks plan to increase their gold holdings in 2025, with none intending to sell.
A Strategic Hedge Amid Rising Risks
A Strategic Hedge Amid Rising Risks
While gold has long served as a traditional safe haven, recent trends point to a more strategic motivation: diversification away from the U.S. dollar. The wave of buying began well before former U.S. President Donald Trump launched a global trade war, but escalated sharply after the U.S. and its allies froze Russia’s foreign reserves in response to the 2022 invasion of Ukraine. That move spooked many policymakers, prompting a reassessment of reserve strategies.
“Gold is the safest reserve asset,” said Adam Glapinski, Governor of the National Bank of Poland, one of the world’s most active buyers. “It is free from direct links to any country’s economic policy, resistant to crises, and retains its value over the long term.”
Countries like Kazakhstan, which had been sellers of gold in recent years, have returned to the market as buyers. Timur Suleimenov, Governor of the National Bank of Kazakhstan, described gold as not only an insurance asset but also a sound investment in the face of global uncertainty.
Undisclosed Purchases Cloud the Market
Despite rising demand, a significant portion of central bank buying remains off the books. Data from the World Gold Council shows that only about a third of detected purchases were publicly reported in 2024. While many institutions do report to the International Monetary Fund, others—particularly in Asia and the Middle East—maintain a higher level of secrecy.
China is a major focus of this opacity. The People’s Bank of China (PBOC) is suspected of accumulating gold at a far faster pace than its official data suggests. Market watchers recall China’s surprise disclosure in 2015 of a 600-ton jump in its reserves after years of silence. Analysts like Evy Hambro of BlackRock and Daan Struyven of Goldman Sachs believe that China may now be purchasing around 40 tons of gold monthly, based on trade flows from Switzerland and London.
These imports continue even during periods when gold is more expensive in international markets than in China, suggesting official-sector stockpiling rather than private demand. Large 400-ounce bars—typical of central bank holdings—have been shipped to China from London, reinforcing the idea of covert accumulation.
Managing Reserves in a New World Order
China’s reserve management strategy is closely held between the PBOC and the State Administration of Foreign Exchange (SAFE), a bureau under the central bank. Analysts speculate that some of the gold is being held outside of the PBOC’s official balance sheet, further obscuring true reserve levels. China currently holds about 6% of its reserves in gold—far below the 75% average among major Western economies. Many expect that emerging markets will aim to raise their gold allocations toward the global average of 20%.
Beyond China, central banks in Eastern Europe, the Middle East, and Asia have all increased their gold reserves. A surge in gold exports from the UK to Switzerland after 2022 aligns with this trend, with trade data revealing over 1,200 tons of central bank gold being routed through the country for storage or onward shipment.
The freezing of Russia’s assets, mostly held in Belgium’s Euroclear system, has set a precedent. As discussions continue about potentially seizing those funds to support Ukraine, central banks are increasingly considering gold—especially when stored domestically—as a safer alternative immune to sanctions.
Dollar’s Role Under Scrutiny
The shift away from the U.S. dollar is accelerating amid fears of further geopolitical weaponization of currencies. UBS strategist Massimiliano Castelli notes that concerns about Federal Reserve independence and suggestions that the Trump administration might weaken the dollar intentionally have further rattled reserve managers.
While diversification options remain limited due to the scarcity of non-dollar sovereign debt, gold is emerging as the asset of choice. According to JPMorgan Chase, a mere 0.5% reallocation of global U.S. foreign reserves into gold could push gold prices as high as $6,000 an ounce by 2029—nearly doubling from today’s levels.
“The gold market is big, but the dollar market is enormous,” said Hambro of BlackRock. “A small shift from dollar reserves into gold can have a massive impact.”
A New Era for Gold
As central banks continue to accumulate gold—often quietly and strategically—the precious metal has reclaimed its position as a cornerstone of global financial security. With geopolitical tensions rising and faith in the dollar under strain, the world’s oldest store of value is once again taking center stage in the reserves of nations.
