Is the central bank gold rush over?

Central banks hoarded gold at a breakneck pace over the past three years. World Gold Council data shows central banks bought 1,082 tonnes of bullion in 2022, 1,037 tonnes in 2023 and 1,044 in 2024. A troy ounce of the metal now costs more than $3,000, having increased over 40% since January 2024.

The adage that gold is a good hedge against volatility has demonstrated some value in recent years, as can be seen by contrasting a measurement of geopolitical instability and the price of bullion (see figure 1).

Geopolitics – including the weaponisation of the US dollar – appears to be playing a role in central banks increasing their gold holdings. As ‘The Washington Consensus’ continues to decline in influence along with the dollar’s role as the world’s main reserve currency, countries that are not closely aligned with the US – as well as some that are – are opting to diversify assets.

“The decision to buy more gold in 2024 has proven to be a good one, as the price of gold, with occasional short-term corrections, has an upward trend,” an official from the central bank of Bosnia and Herzegovina tells Central Banking.

For central banks, gold can serve as a long-term store of value, a trustworthy asset to fall back on during financial crises, a hedge against default risk, and a portfolio and geopolitical risk diversifier. Most central banks building gold reserves are from emerging markets – they are far more likely to hold gold due to concerns about systemic financial risk, as gold can be converted into any number of foreign currencies that they may require in case of emergency.

Two central banks told Central Banking in the Reserve Benchmarks 2024 that using the international financial system to achieve foreign policy goals would boost gold in central banks’ reserves. One of them is geographically close to a belligerent state. For them, holding significant amounts of gold can serve as a tool to increase investor confidence in the domestic currency.

While optimising for returns is not the usual business of central banks, it is also difficult to ignore how gold outperformed many other asset classes over the past quarter century. Moreover, many central banks have generated losses over the past two years: for example, Sweden’s central bank, the Sveriges Riksbank, had held a significant amount of government debt it acquired through monetary policy asset purchases. Losses on these purchases have forced the board to take a more hands-on approach to reserve management, while also asking for the state to recapitalise it. Touching gold reserves for these central banks is seen as a last resort.

The decade-long trend of central banks hoarding gold is partly related to the growth of overall foreign exchange reserves. But there is another common undertone: decreasing confidence in the dollar as the de facto international reserve currency. Institutions are not just worried about the performance of the greenback. For some, the US’s harnessing its ‘underground empire’ to shut Iran out of the global financial system to stifle its nuclear programme was the first sign of a US approach to weaponise the dollar. As Daniel Drezner, Henry Farrell and Abraham Newman detailed in The uses and abuses of weaponized interdependence, the US was able to use its dominant position in global financial networks to enact financial sanctions on Iran. If mere disagreement with the US could make an entire country lose access to the dollar system, what would worse strife mean for geopolitically revisionist countries?

The answer came in February 2022 after the freezing of the Bank of Russia’s assets. While most of these assets are held with Belgian securities depository Euroclear, their fate is, in the words of the firm’s CEO, a “political decision”. For countries that have even the slightest risk of being at odds with the US – a risk that is only continuing to grow – holding gold makes more sense than dollars.

Through 2024, it seemed that central banks would keep purchasing gold regardless of the price, but purchases tapered during the third quarter as central banks took note of the People’s Bank of China (PBoC) halting purchases. But, after taking a wait-and-see approach, central banks began hoarding gold again as uncertainty mounted around the US election and the effects of the incoming administration’s tariffs.

Historically, gold prices are heavily influenced by rising uncertainty that is often reflected by volatility in the US dollar, heightened inflation expectations and interest rate divergence between major economies. Higher-for-longer US inflation – and Federal Reserve rates – appears to have kept driving prices higher.

To understand the pace of the gold rush, one can look at the rapid revision of Goldman Sachs analyst predictions. In late February 2025, they expected the price of gold to climb over $3,100 by the end of 2025. The prediction was subsequently revised to $3,300 to $3,500, then to $3,700, before breaking through the $4,000 mark in the April forecast. Interest in gold is underpinned by continued demand for the metal from central banks as well as private investors moving into gold-based exchange-traded funds (ETFs) as declining interest rates outside the US make gold a more attractive investment.

One-third of central bank reserve managers responding to HSBC Reserve Management Trends 2025 said they were looking to increase their gold hold holdings despite the record-high prices.

Emerging powers and the signalling question

Since the invasion of Ukraine in 2022 and the subsequent freezing of the Bank of Russia’s assets held abroad, countries with diplomatic disagreements with ‘the West’ are increasingly looking to exchange their dollars for physical gold. The prime examples of this are China, India and Russia.

The PBoC bought 44.2 tonnes of gold in 2024, 29 tonnes in the first four months of the year, then took an abrupt six-month pause. At the end of the year, the Chinese central bank reported holding some 2,280 tonnes. But official-sector Chinese holdings of gold may be higher.

In China’s case, too, foreign policy plays a role in accumulating gold. The country’s development projects abroad, such as those under the Belt and Road Initiative, encouraged some central banks to hold renminbi in their foreign reserves. But as the renminbi depreciated, parallel to China’s weakening economy, these central banks may have wanted to reduce their exposure to the Chinese currency – so purchasing more gold could be seen as a way to instil confidence in renminbi-holding foreign central banks to maintain their holdings.

The Reserve Bank of India, too, increased its gold holdings in 2024, buying 72.6 tonnes of bullion – more than four times as much as it did in 2023. Russia’s central bank reportedly bought 3.1 tonnes over the past 12 months. Its gold holdings are fifth in the world, at 2,330 tonnes, just ahead of China’s 2,290 tonnes, as of January and February 2025 respectively, according to World Gold Council data.

For some of these central banks, the question of communication is key, as they may feel that their gold purchases are signalling to other parties, particularly the US, their strategic positions.

The Saudi Central Bank (Sama) is in a similar position. Although the country has historically been aligned with the US, relying on it for security since the late 1970s in exchange for a steady supply of energy sold in dollars, it is aiming to become a regional hegemon. The country continues to pour its sovereign wealth fund’s cash into various megaprojects while aiming to shield itself from US policy coercion.

Jan Nieuwenhuijs, a gold analyst at Money Metals, wrote, for Saudi Arabia and China, the publicised amount of gold purchases was a “purely political” decision. In an exploration of Saudi and Swiss export/import data, Nieuwenhuijs asserted that Sama bought at least 160 tonnes of gold in 2024 in secret. Sama did not respond to a request for comment before publication. In Russia’s case, numerous reports point to the role of gold in funding its war effort. According to a World Gold Council report published in 2024, the Wagner Group, a private military company linked to the Russian state, has generated over $2.5 billion through illicit gold mining operations being used to fund the military. Another report, by US think-tank Rand Group, titled Gold rush: how Russia is using gold in wartime, puts forward that gold has been crucial to Russia’s most important wartime trading relationships, specifically with China, Turkey, Iran and the United Arab Emirates, using bullion to pay for weapons and hard currency.

Central Europe’s unique case

But some of the biggest purchasers of gold in 2024 were European central banks: Poland topped the charts, with 89.5 tonnes, followed by the Czech National Bank with 20.5 tonnes and the Central Bank of Hungary (MNB) with 15.5 tonnes.

For these central banks, gold is a tool for diversification without expanding into exotic assets, while providing a way to intervene in foreign exchange markets if conditions deteriorate, Jan Schmidt, executive director at the CNB’s risk management department, tells Central Banking.

In Schmidt’s view, if a central bank decides that gold is a strategic asset, it “does not matter” how much it pays for the gold, as the investment horizon is several decades, he says.

For the CNB, the target was increasing gold reserves to 100 tonnes, and the bank is now more than halfway there. But it continues to build gold reserves gradually. The CNB’s build-up is taking place over several years, Schmidt adds.

“One important aspect of gold is that it is very sensitive to public opinion,” he says. Schmidt adds that the public “does not care too much about the structure of the reserves – how much the bank holds in US treasuries, for example – but gold is more interesting”.

The risk manager notes that gold prices should be seen in a 15-year scope. Geopolitics and inflation may all stimulate further gold purchases, but it is “difficult to talk about gold in general”, he notes.

The spectre of the global financial crisis still haunts these countries. While Poland escaped the crisis relatively unscathed, others were not so fortunate. Overleveraged western banks had some $1.1 trillion outstanding in eastern Europe – so when short-term funding dried up, “the floating currencies of eastern Europe plunged”.

Hungary’s experience is a case in point. The country’s entire 130% increase in household debt was made up of FX-denominated credit, mostly in Swiss francs, euro and Japanese yen. In just a few weeks, Hungarian families with foreign currency-denominated debt saw their debt burdens rise dramatically. As economic historian Adam Tooze has documented, eastern European states did not have substantial reserves to fall back on when global liquidity began drying up. They expected the European Central Bank to establish swap lines, but this did not materialise. Instead of swap facilities for forints or zlotys, the ECB only offered short-term lending in exchange for first-class euro-denominated securities. Budapest was forced to turn to the IMF for a loan of $25 billion, or 20% of the country’s pre-crisis GDP, in October 2008.

It is no surprise that, over the 2010s, the MNB put a heavy emphasis on converting all mortgages to be forint-backed. The bank also built large gold reserves: from the legal ‘minimal level’ of 3.1 tonnes that it held in the 1990s, the MNB increased holdings to 31.5 tonnes in 2018. The bank further tripled its holdings in 2021 to 94.5 tonnes, and added some 15.5 tonnes in 2024.

Another reason behind the MNB’s gold purchases could stem from the country’s closer alignment to China. Hungary has harboured interest from Chinese investors and the country’s electric vehicle firms, and its central bank regularly mentions Chinese economic development as a factor affecting its policy decisions. From this perspective, the MNB’s continued purchases could be seen as correlated with the PBoC’s efforts to hoard gold: Chinese demand-induced price increases will keep paying off for the MNB.

In Poland’s case, the decision to continue purchases also comes from governor Adam Glapiński’s personal preference for gold. On October 4, 2024, the governor announced that the country’s gold holdings reached 400 tonnes. “We are aiming for 20% of our currency reserves to be in gold,” Glapiński said at a news conference in Warsaw.

Artisanal and small-scale gold mining

Central banks in gold-producing countries are also acquiring locally produced gold to increase FX reserve holdings without using foreign exchange.

This is beneficial for both developing local industry and growing central bank gold reserves. The World Gold Council has worked with local producers to ensure the legal safety of buying local gold – which has led to some mining booms in, for example, the Philippines.

Several central banks have laws that require them to buy a specific percentage of local gold production. but this is not monetary gold – so it needs to be processed to reach the monetary purity level.

Over the past three years, the Central Bank of Ecuador has bought some 4 tonnes of non-monetary gold from the local artisanal and small-scale gold mining (ASGM) sector. Ecuadorian miners must meet strict requirements to participate in the bank’s acquisition programme: they must be formally approved by local authorities; prove their environmental credentials; pay their taxes and debts; obtain certificates that guarantee their non-involvement with money laundering and terrorism financing; and have transparent finances. The CBE received Central Banking’s Initiative of the year award in 2023 for its ASGM programme.

Storage and movement

Policies by the second Donald Trump administration, however, have raised fears that tariffs could be imposed on US gold imports, which has upset market dynamics. Gold price continued to soar well into the new year, but some traders looked to move bullion from the vaults in Threadneedle Street to Liberty Street.

As the Financial Times documented in March, this requires gold to be melted down and recast. In London, a standard gold bar weighs 12.5kg. In New York, the standard size is around 1kg. Before moving westward across the Atlantic, gold is taken to Switzerland for resizing.

Heightened demand for the Bank of England’s vault has created something of a bottleneck. The soft clay foundations of the BoE’s building means that gold can only be stacked to about shoulder height. Staff accessing gold must be highly vetted, carefully trained and strong enough to carry gold bars all day long.

“There has been strong demand for delivery slots,” acknowledged BoE deputy governor Dave Ramsden at a February monetary policy press conference in response to a question by Central Banking. He admitted to having been held up by a lorry in the bullion yard while coming into the BoE building earlier in the day: “Gold is a physical asset. So, there are real logistical constraints and security constraints.”

Once gold bars have left the London vaults, they are flown to Zurich in passenger planes, as moving gold using normal cargo planes is not possible because of insurance concerns.

But gold is moving in the other direction, too. Senior figures from German politics have hinted at moving the Bundesbank’s 1,200 tonnes of gold – some 30% of its gold reserves – out of the Federal Reserve Bank of New York over worries about the Trump administration’s policy uncertainty.

The Bundesbank, for its part, still has “absolutely no doubt that in the Federal Reserve in New York we have a trustworthy, reliable partner in the storage of our gold reserves”, it told German newspaper Bild on March 27.

Overall, few reserve managers said that they changed gold storage arrangements – just 4.9% of 82 respondents moved their bullion over the past year, HSBC Reserve Management Trends 2025 data reveals.

An aide towards multipolarity

Over half of central bank reserve managers responding to the Reserve Benchmarks 2024 believed that the continued use of the US dollar as a foreign policy tool – whether financial sanctions, or asset freezing – would reduce the US dollar’s share in reserves portfolios.

One reserve manager said that finding the right time to increase gold holdings was difficult because of the price volatility, while another noted that they were limiting the “extent to which they want to increase” holdings due to any future potential mark-to-market losses.

One reserve manager from a central bank in Africa noted that they were looking to purchase gold locally, while another celebrated the opportunities provided by gold ETFs to diversify assets.

But a key driver of gold price is its use in high-technology and the consumer market, particularly for jewellery. Indian and Chinese consumers have historically hoarded gold, so any consumer sentiment downturn could affect the global price of bullion. Indeed, a study by HSBC Global this year found that Indian households now possess more gold than the collective reserves of the world’s top 10 central banks. A slowdown in the tech sector could also dampen gold demand and slow down bullion appreciation.

While some have speculated that digital currencies could replace gold – with Fed chair Jerome Powell calling bitcoin “digital gold” – the price volatility experienced by crypto assets is much greater than that of bullion.

Ultimately, the central bank gold rush may be far from over. There is simply no alternative to gold. It is the smallest common denominator of virtually all reserve assets, and is especially attractive when access to dollar markets could be in jeopardy. For some central banks, it is a ‘plan B’, if access to the dollar market disappears. For others, it is an alternative to swap lines.

Bullion represents stability in a volatile and quickly changing world, and even if the geopolitical race to the bottom fades, reserve diversification may well continue. Unlike during the decline of sterling’s status as the global reserve currency, there is no clear alternative coming to take the dollar’s place. The euro is plagued by interstate issuance and a relatively small footprint, while the renminbi is not freely convertible.

Gold comes with its drawbacks: it cannot be easily moved. But its analogue nature is also an upside: gold is physical – and throughout history, it has always held value.

Mankind is unlikely to be crucified “upon a cross of gold”, as William Jennings Bryan once prophesied, but central banks may be less inclined to tie themselves to a declining, volatile issuer of the world’s dominant reserve currency in the years ahead.