World’s Safest Asset Right Now? Why Central Banks Are Hoarding Gold Like Never Before | Economy

Is Gold still the safest investment bet for investors? The rate at which central banks across the globe have acquired the yellow metal is once again proving that gold still enjoys trust amid a highly volatile global economy. As per the International Monetary Fund data (IMF), the last time central banks had as much gold was almost five decades ago. In 1978, the central banks were holding a combined monthly average of almost 36,400 tonnes of gold. After almost 50 years, this kind of gold accumulation is being seen by banks across the world as the monthly average till July stands at nearly 36,300 tonnes.

Though the rush for yellow metal has slowed a bit, but trend continues to remain upwards.

Typically, in uncertain times, long-term government bonds rally as investors seek safety, often dubbed “the world’s safest asset,” according to Reuters. As demand for these bonds rises, their prices increase and yields fall. However, this time is different. Instead of a rally, long-dated government bonds are being sold off globally, pushing yields higher — a clear sign that investors are beginning to question the very safety of government debt.

India Goes For Gold Rush Too

At a time when the geopolitical space is witnessing a major upheaval with US President Donald Trump changing the terms of global trade, India too has increased its gold accumulation. Though India went on a buying spree from 2014 onwards, the move took off around 2018. As per the World Gold Council, the move was aimed at rebalancing India’s reserves.

Since early 2024, India has added over 300 tonnes of gold to its reserves, making it the fourth-largest central bank gold buyer globally during this period. This move comes as India continues to reduce its holdings of US government bonds, which have declined from $242 billion a year ago to $227 billion as of June 2025, according to Bloomberg.

India’s growing gold reserves reflect a strategic shift in its foreign exchange management, especially amid rising global uncertainties. With US President Donald Trump’s aggressive tariff policies targeting a range of goods — including key commodities and industrial products — trade relations between India and the US have come under strain. Trump has levied a steep 50% tariff on Indian goods, which includes an additional 25% penalty for purchasing Russian oil.

At the same time, the Russia-Ukraine conflict continues to impact global energy markets. Western sanctions on Russian oil have pushed many countries to scramble for alternative energy sources, causing global crude prices to surge. India, as one of the world’s largest oil importers, remains particularly vulnerable. Even though India has been purchasing discounted Russian crude, geopolitical pressures and payment restrictions complicate this strategy.

The expanded gold reserves serve as a critical buffer amid these challenges. In a scenario where tariffs dampen export revenue, remittance flows dip, or crude prices climb further, India would still need a robust foreign currency cushion to meet essential payments — including oil imports, foreign debt servicing, and stabilising the rupee.

Global Gold Reserves Hit Record High

Right now, central banks around the world hold more gold than ever before — worth about $2.5 trillion, according to IMF data. This trend is expected to continue for some time. In a June 2025 report by the World Gold Council, 43% of central banks surveyed said they plan to increase their gold reserves over the next year. The desire to add more gold is especially strong among central banks in emerging markets and developing economies, including India, compared to richer, advanced nations.

Shift from Selling to Hoarding Gold

To understand how significant this shift is, we can look at the World Gold Council’s data on official gold reserves. In the past, more central banks used to sell gold than buy it. But that changed during the 2008 financial crisis, when many started buying gold as a safety measure.

Over the past three years, the European Central Bank (ECB) noted that “central banks, especially those from emerging market economies, have increasingly purchased gold, most likely to insulate themselves from the effects of geopolitical tensions or potential sanctions.” The rush accelerated last year, when central banks added more than 1,000 tonnes of gold in just one year, and the pace has not slowed since.

A Return to Bretton Woods Levels

The ECB also said that central banks are now building up gold reserves at a “record pace,” reaching levels seen during the Bretton Woods era, when global currencies were linked to the US dollar, and the dollar itself was backed by gold. Back then, holding large gold reserves meant a country’s currency was seen as more stable.

Why Gold Is a Safe Haven Today

The reasons for stockpiling gold remain familiar: it is a safe protection against inflation, a long-term store of value, and an asset that holds its value well during times of crisis.

The need for gold became even clearer in 2022, when Russia’s dollar and euro reserves were frozen after its invasion of Ukraine. This event exposed the risk of relying too much on western currencies, which can be blocked, frozen, or seized. In contrast, gold is impossible to freeze or block.

Growing Distrust in US Bonds

At the same time, growing concerns over America’s huge debt, now over $37 trillion, are making US government bonds less attractive. Many central banks are now wary of holding too many US bonds because of the risks linked to US debt and political instability in Washington.

The World Gold Council also found that 73% of central banks expect their US dollar holdings to fall moderately or significantly over the next five years. On the other hand, 76% believe gold will make up a larger share of their total reserves during the same period. This trend holds true across both advanced and emerging economies.

Going forward, if global tariff wars intensify or supply chains break down, central banks are likely to keep buying gold as a safe hedge against economic uncertainty and weaponised currencies.

In short, gold is becoming the go-to fallback for central banks once again.