Global central banks bought net 10 tonnes in July based on reported data, a moderate net allocation compared to previous months, as per the World Gold Council. Despite this slower pace of net buying, central banks continue to be net buyers of gold even in the current price range.
Central banks hold gold in their foreign currency reserves portfolio as a relatively low-risk asset, often seen as a hedge against inflation and geopolitical or economic uncertainty. In normal circumstances, they reduce purchases when gold prices are high. “What is different now is that uncertainty itself has become systemic,” the United Nations agency for trade and development said, in its Global Trade Update on Monday, adding that this hit developing economies hardest.
Aggressive gold-buying by China’s central bank since 2023 has raised the question of how far China will boost its reserves as it tries to reduce its reliance on the dollar and align its holdings with its status as the world’s second largest economy. China’s purchases coincide with a rally from 2023 to 2025 that has driven gold prices to a record high.Gold upstages euro and US treasuriesIn a significant shift within the global financial system, gold has overtaken the euro to become the second-most important reserve asset held by central banks, trailing only the US dollar. For the first time in nearly three decades, gold now makes up a larger portion of central bank reserves than US Treasury securities, a landmark development that reflects broader concerns over inflation, geopolitical instability, and shifting monetary policy dynamics.
According to a recent report by the European Central Bank, central banks worldwide now collectively hold approximately 36,000 metric tons of gold. This marks a dramatic accumulation trend that accelerated following the COVID-19 pandemic and the 2022 Russian invasion of Ukraine—events that heightened economic uncertainty and pushed central banks toward what many consider a “safe haven” asset. Over the past three consecutive years, annual gold purchases by central banks have exceeded 1,000 metric tons, more than double the average yearly acquisition seen during the previous decade.The surge in gold holdings has been accompanied by a sharp rise in the metal’s market value. With gold prices currently trading above $3,500 per ounce—a staggering 35% increase since the beginning of the year—the total value of gold held by central banks is estimated at around $4.5 trillion. In comparison, their holdings of US Treasuries now amount to approximately $3.5 trillion.This shift also highlights a broader trend in the composition of global foreign exchange reserves. The share of Treasuries in central bank reserves has steadily declined, currently making up just 23%—a notable drop from over 30% during the peak years of the 2010s. In contrast, gold now accounts for roughly 27%, underscoring its growing importance in global reserve management strategies.
India’s central bank too has preferred to increase its gold holdings over US Treasury bills to bolster foreign exchange reserves, shows the latest US Department of Treasury and Reserve Bank of India (RBI) data, reflecting a broader worldwide trend to diversify national savings beyond the greenback. India’s investments in US T-bills fell in June compared with a year ago while its gold holdings rose during the same period. Still, India remains among the top 20 investors in US T-bills, ahead of Saudi Arabia and Germany. Its holdings stood at $227 billion in June 2025, albeit lower than $242 billion in June last year.
Analysts point to multiple drivers behind this transition. Persistently high inflation, currency volatility, waning confidence in Western fiscal policies deteriorating US fiscal health, concerns over US Federal Reserve independence and geopolitical instability have prompted central banks—especially those in emerging markets—to diversify away from traditional reserve assets like US debt. Gold, with its intrinsic value and lack of counterparty risk, has increasingly become the asset of choice in an era of heightened financial caution.
Tavi Costa, macro strategist at Crescat Capital, has told Reuters there are clear parallels between what we’re seeing today and the 1970s when monetary instability, inflation, and geopolitical shifts made gold a key strategic reserve asset for central banks. The fact that foreign central banks now hold more gold than US Treasuries is a “significant milestone” that signals a deeper, longer-term, structural change in reserve management, Costa argues. “What we are witnessing may well represent the early stages of a major realignment in global reserve composition.”
Despite this renewed enthusiasm for gold, experts believe it is unlikely to return to the dominant position it held in the late 1970s and early 1980s, when it represented a staggering 75% of global reserve holdings. Achieving that level again would likely require a severe and prolonged economic downturn, coupled with sustained periods of double-digit inflation—conditions that, while not impossible, remain largely outside mainstream forecasts.
Nonetheless, the current momentum behind gold reflects a broader rethinking of what it means to safeguard national wealth. As global tensions persist and monetary landscapes evolve, the yellow metal appears poised to play an increasingly prominent role in the strategies of the world’s central banks.
Will central banks continue to buy more gold?Annual net purchases of gold by central banks have exceeded 1,000 metric tons each year since 2022, according to consultancy Metals Focus, which expects them to buy 900 tons this year – twice the annual average of 457 tons in 2016-2021, as per a Reuters report. Developing countries are seeking to diversify from the dollar after Western sanctions froze roughly half of Russia’s official foreign currency reserves in 2022. Official numbers reported to the International Monetary Fund reflect only 34% of the 2024 total central bank gold demand estimate, according to the World Gold Council, an industry body. They have contributed 23% to total annual gold demand in 2022-2025, double the average share recorded during the 2010s.
All signs suggest that central banks are likely to continue buying gold in the foreseeable future though the pace and scale of these purchases may fluctuate depending on global economic and geopolitical conditions.
One of the primary motivations driving this trend is diversification. Many central banks, particularly in emerging markets, are seeking to reduce their reliance on the US dollar and dollar-denominated assets such as Treasuries. This de-dollarisation movement has gained momentum in recent years, especially in countries that have experienced sanctions or face potential financial isolation. Gold, which is universally accepted and not tied to any single country’s credit risk, offers an attractive alternative.
Inflation concerns also continue to play a major role. Even though global inflation has cooled in some regions, it remains elevated in others. Central banks often view gold as a hedge against inflation and currency depreciation, especially when interest rates are uncertain or when traditional monetary tools lose effectiveness.
Additionally, geopolitical tensions, from ongoing conflicts like the Russia-Ukraine war to rising US-China competition, have made many countries more cautious about where and how they store their reserves. Gold’s physical nature, and the fact that it can be held domestically outside the Western banking system, makes it especially appealing to countries looking to safeguard assets from potential sanctions or asset freezes.
Moreover, some central banks are adjusting their long-term reserve strategies based on lessons learned during recent global crises. The pandemic, disruptions to global trade, and heightened volatility in financial markets have reinforced the need for stability in reserve portfolios. Gold, which has historically maintained its value over time, is increasingly seen as a strategic asset rather than just a financial commodity.
However, it’s unlikely that gold buying will continue indefinitely at the record-breaking pace seen over the past few years. Some central banks may slow their purchases as their gold allocation reaches target levels, or if global economic conditions stabilise. Additionally, if interest rates remain high or the US dollar regains strength, the appeal of non-yielding gold may diminish somewhat.
(With inputs from agencies)
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