The Global Gold Rush: Why Central Banks
Are Hoarding Gold (And What It Means for
You)

Whether it is used for investments, jewellery, or as a symbol of riches, “Gold” has always held a special position in our lives.  However, gold has also emerged as the preferred asset for nations in recent years.  Everyone appears to be increasing their gold reserves, including central banks in Europe and the Middle East, China, and India.

 Let's analyse the causes of this worldwide gold rush and its potential implications.

What’s Actually Happening around the World?

Over the last few years (3-4), many countries have been buying gold at record levels.
According to global data:

• Central banks across the world collectively bought over 1,000 tonnes of gold in 2022 and 2023, which is the highest in decades.
• India’s Reserve Bank, i.e. RBI, has also steadily increased its gold reserves.
• China, Turkey, Russia, and Poland are among the biggest buyers is last few years.

Here are some top countries with the highest Gold Reserves: (as of June 2025)

 Source: NGEN Markets

If we look at India, RBI's gold reserves rose 26% since FY21, reaching 880.00 tonnes by June 2025, with gold now making up 11.7% of India's total forex reserves.

In FY2021, approx. 5.9% of reserves were in gold vs 11.7% gold reserves is a significant rise.

But the question here is, why are they doing it? Let’s look at the reasons.

What are the Reasons Behind the Gold Buying Trend?

1. Reduction in Dependency on the US Dollar:

The world's main reserve currency has been the US dollar for a very long time. However, many nations now wish to diversify, meaning they don't want to keep all their savings in a single currency. They have a safer, neutral asset that is independent of the politics or economy of any one nation when they own gold.

2. Geopolitical Tensions and Sanctions:

Countries are concerned that their foreign reserves, particularly those kept in dollars or euros, may be blocked or sanctioned due to conflicts such as Russia-Ukraine, Israel-Hamas, and global power rivalry.

Gold, on the other hand, is a store of value that remains in your hands and cannot be banned. Further, it also cannot be devalued by another nation as it is not officially linked to the US dollar or any other currency. The gold price is set by supply, demand, and investor sentiment, not by governments.

3. Inflation and Global Uncertainty

Countries have printed enormous quantities of money to stimulate their economies since COVID-19.  Globally, this resulted in high inflation.  Gold tends to shine when paper money depreciates because it is thought to be a hedge against inflation.

4. Declining Trust in Western Economies:

Many developing nations believe that the global financial system favours the West.   They are preparing for a more balanced global economy where a range of assets and currencies are equally significant by investing in gold.

Why is India increasing Its Gold Reserves gradually?

Gold has traditionally been valued in India, both culturally and economically. In order to improve India's financial stability and diversify its reserves away from the dollar, the RBI has begun accumulating gold.

It also helps in maintaining trust during global market volatility, providing a hedge against currency fluctuations and supporting the rupee’s stability over time.

What could the Possible Impact of This Gold Buying Trend?

• Stronger Central Bank (RBI) Reserves

Countries with more gold are seen as more stable. It boosts confidence among investors and global trade partners.

• Long-Term Support for Gold Prices

With RBI continuously buying, gold demand will likely stay high. This can keep gold prices elevated in the coming years.

• Possible Pressure on Currencies:

If too many countries reduce their dollar holdings, it might affect the value of the US dollar. At the same time, currencies backed by stronger gold reserves could become more attractive.

• Step Toward a Multi-Currency World:

The trend could gradually lead to a world where no single currency dominates, and gold once again plays a bigger role in global trade and finance.

It’s a way for countries, especially emerging economies like India to prepare for uncertain times, reduce dependence on the US dollar, and build long-term financial security.

Due to its continuous demand, Gold has delivered extraordinary returns in last few years.

In simple words:

“Gold is just like the 'Insurance policy' of the country, which will protect in times of fear, instability, currency fluctuation and inflation”

Being a retail investor, it is recommended that 5%-10% of your portfolio can be allocated towards Gold. However, consider it as a long-term investment and not a quick gain strategy.

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