It Is a Strategic Move
Gold is bought by central banks for more than one reason, not just because it looks nice. Gold has become an important safe-haven asset since it’s value went above $3,000 an ounce. In the first three months of 2025, the National Bank of Poland bought 49 tons of gold. It’s crazy that the People’s Bank of China now has 2,292 tonnes of gold.
A Change in Dependence
- The current gold rush is driven by a strong desire to rely less on the US dollar. Due to geopolitical tensions and financial problems, countries are aggressively exploring alternatives to assets denominated in dollars. Gold is one of the non-sovereign assets that stands out because it may be a reliable way to protect.
- China, Russia, and Iran are all trying to “de-dollarize” by increasing their gold reserves. These countries are doing this to keep themselves safe.
- Gold prices have typically gone up when inflation has gone up, which is beneficial for central banks that want to keep the value of their reserves.
Past Crises
The global financial crisis of 2008 caused a lot of central banks to take action. The subsequent quantitative easing measures and revisions to monetary policy demonstrated the dangers of relying solely on fiat currencies and financial instruments issued by the government. Gold was able to demonstrate its endurance in the face of economic downturns during that period.
Physical Gold Investment
- Although some central banks buy gold through exchange-traded funds or futures options, they buy gold bars that are kept in vaults.
- This makes it possible for private investors to follow the goals of the central bank. During times of uncertainty, the purchase of American gold coins and bars may result in financial rewards and create a sense of stability.
