Gold has been on the fast lane since 2022. If you ask me, where the biggest demand for gold comes from, the answer is, it’s the central bank buying.

Just look at the tonnage of gold they are hoarding. According to the World Gold Council, in 2022, global central banks purchased 1,082 tonnes, 1,037 tonnes in 2023 and a record 1,180 tonnes of gold in 2024.

But what was the scenario before that? The total gold purchased by central banks in 2020 and 2021 was less than 1,000 tonnes.

This shows that as demand for gold went up, so did the price. Gold has moved up from $1,730 in July 2022 to $3,330 in July 2025 – Over 90% return in 3 years!

And, just look at the difference this aggressive gold buying has made in their forex reserve holdings.

With 20%, gold is now the second-most important foreign exchange reserve asset (after the dollar’s share of 46%) held by central banks, surpassing even the euro with 16%.

Are central banks still buying gold?

According to WGC data, central banks’ purchases are showing a falling trend in the first 2 quarters of 2025 – 244 tonnes of gold in Q1, and 166 tonnes in Q2.

The National Bank of Poland once again led the buying in Q2, along with other prominent buyers like Azerbaijan, Turkey, Kazakhstan and China.

Metals Focus, a leading independent precious metals research consultancy firm, estimates central banks will end 2025 by buying 8% less but will still end up with 1,000 tonnes of purchases.

However, according to some other estimates, central banks may end 2025 with less than 1,000 tonnes.

Buying in Q3 of 2025

Since July 1, the gold prices have been hovering in a tight range. This could give central banks an opportunity to buy more gold.

But are they still interested? The WGC’s Central Bank Gold Reserves Survey 2025 revealed that 43% of central bankers plan to increase their gold reserves over the next 12 months.

Now, here’s a twist. Many governments continue to declare only one-third of their gold purchases. The majority of unreported gold purchases are made by governments in secrecy.

Gold price today in India is Rs 98,350, nearly at the same level two months back.

Tailwinds or Headwinds

But the gold rally seems to have stalled. Since April, the tailwinds that led to a strong demand seem to be fading. Trump tariff deals are at least coming out in the open, and the cloud of uncertainty is lifting. Dollar has also started to show strength rising 3% in one month after dropping 10% earlier.

The US fiscal numbers and the debt overhang remain a big concern that still threatens the dollar’s position as the world’s reserve currency.

Economic worries and credit rating agency Moody’s cutting the US credit rating from Aaa to Aa1, still remain the biggest tailwind for now, keeping gold prices higher. If these factors subside and the geopolitical scenario turns upbeat, expect a sharp fall-back in gold prices. A 10% to 15% correction may not be ruled out.

Gold Outlook

Central banks now officially hold 36,305 tonnes of gold as of April 2025. On social media, I found a viewpoint that many investors hold – ‘Central banks know something about the economy and dollar, that others don’t know’.

Well, if that is true, then the subdued buying by them in Q1 and Q2 of 2025 also points to a brighter outlook ahead for the economy and gloomier for gold.

But till the on-ground situation changes and the world moves towards peace and a growth-led recovery, uncertainty will prevail, keeping the demand for the yellow high.