Weighed by global conflicts, central banks see gold reserves on the rise

Central Banks Increase Gold Reserves Amid Rising Global Uncertainty

In the face of intensifying geopolitical tensions and volatile economic conditions, central banks around the world are turning to gold as a strategic reserve asset. Data from the World Gold Council (WGC) and recent central bank disclosures show a clear trend: gold accumulation is accelerating, marking a shift in global reserve management strategies that is deeply tied to concerns over currency stability, inflationary pressures, and the reconfiguration of global alliances.

A Flight to Safety as Geopolitical Risks Escalate

From the ongoing war in Ukraine and escalating tensions in the Middle East to increasing U.S.-China decoupling and election-related uncertainty across major economies, central banks are facing a turbulent macroeconomic environment. These developments have reinvigorated the perception of gold as a safe-haven asset.

“In a world where fiat currencies are facing devaluation risks and foreign reserves can be weaponized, gold remains a neutral and reliable store of value,” said Marcus Fleury, a commodities strategist at HSBC. “We’re seeing not just developing countries, but also some Western economies quietly restocking gold.”

In 2024 alone, global central banks purchased over 1,100 tonnes of gold, according to WGC data—making it the second-highest annual total on record after the post-pandemic high in 2022.

Emerging Markets Lead the Gold Buying Spree

Emerging markets are at the forefront of this gold-buying surge. Countries like China, India, Turkey, and Russia have been steadily increasing their gold reserves over the past few years. China’s central bank, the People’s Bank of China (PBoC), recently reported its 18th consecutive monthly gold purchase as it seeks to diversify away from the U.S. dollar.

In a statement earlier this year, the PBoC explained: “Our strategy is driven by the need to enhance financial security and reserve diversification. Gold serves as a hedge against dollar volatility and strengthens our monetary buffer.”

Similarly, Turkey added nearly 45 tonnes to its reserves in the first half of 2024, amid lira depreciation and inflation volatility, while Russia continues to stockpile gold as a shield against Western sanctions and currency restrictions.

Western Nations Also Show Renewed Interest

Although historically slower to act, several Western central banks are beginning to re-evaluate their gold holdings. Poland, Hungary, and the Czech Republic—members of the EU—have significantly boosted their reserves over the past three years. Poland, in particular, has made headlines for its plan to hold over 300 tonnes of gold by 2025.

"The geopolitical backdrop is fundamentally different now," said Agata Zurek, an economist at BNP Paribas Warsaw. "Central banks in Europe are now factoring in not just inflation, but also political fragmentation within the EU, NATO dynamics, and energy security—all of which elevate the strategic value of gold."

Gold Prices Respond to Central Bank Activity

The aggressive gold accumulation has contributed to a sustained rally in prices. Gold breached the $2,400/oz mark in mid-2024, supported not just by central bank demand, but also strong retail and ETF flows. While short-term corrections are likely, analysts believe structural demand will keep gold on a bullish trajectory.

“Gold is becoming a preferred choice for long-term reserves, and central banks are unlikely to sell in the foreseeable future,” said Peter Cardillo, Chief Market Economist at Spartan Capital. “This creates a long-term floor under the price.”

De-Dollarization and Gold: A Strategic Realignment

The rise in gold purchases is also aligned with a broader trend of de-dollarization. Several nations, especially those in BRICS, have called for an alternative global financial system less reliant on the U.S. dollar. Gold, being apolitical and universally accepted, has emerged as a key pillar of this transition.

“Gold fits perfectly into the narrative of a multipolar world,” noted Reema Jain, Senior Research Analyst at ICICI Securities. “Countries want to reduce dollar exposure—not eliminate it—but gold offers a neutral asset that is not subject to the same geopolitical constraints.”

Investor Outlook: What This Means for the Markets

For institutional and retail investors alike, the central bank demand signals a long-term bull case for gold. While equity markets remain volatile and bond yields fluctuate in response to interest rate expectations, gold offers portfolio diversification and inflation protection.

Experts recommend maintaining a gold allocation of 5–10% in diversified portfolios. Additionally, gold-backed ETFs, sovereign gold bonds, and physical bullion remain accessible avenues for exposure.

“Follow the smart money,” said Dan Collins, Managing Director at Safehaven Investments. “When central banks, with long investment horizons and vast research capabilities, are buying gold at record levels, retail investors should take notice.”

As global power structures shift and economic risks mount, central banks are reshaping their reserve strategies with a renewed focus on gold. What was once seen as a relic of the past is now at the center of future financial planning. With continued geopolitical strife and economic rebalancing, gold’s role as a strategic, stable, and sovereign asset is only expected to grow.