Why Are Central Banks Hoarding Gold More Than Ever?

Central banks around the world are purchasing gold at an unprecedented pace in 2025. More than 1,000 tonnes are being added annually, which equates to over one third of global gold production. This surge is not just about investment timing or commodity trends. It signals a deeper shift in policy and mindset among nations in response to escalating global uncertainties.

The move towards physical gold reserves is seen as a strategic hedge against systemic risks that have emerged over the past few years. Gold is increasingly viewed not as a luxury but as a necessary safeguard in an unpredictable world.

What Triggered the Surge in Gold Buying by Central Banks 

The freezing of Russia’s foreign reserves following the Ukraine conflict was a watershed moment. It exposed the fragility of holding reserves in currencies subject to political decisions. This event prompted countries to reconsider the concentration of their assets in United States dollars and other Western currencies.

With sanctions becoming more prevalent as geopolitical tools, many nations are turning to gold as an asset that cannot be frozen or seized. It has become an instrument of sovereignty and protection in a time of shifting alliances and rising global tensions.

Read More: RBI’s New Gold Loan Rules from Jan 2026: What They Mean for You! 

India’s RBI Increases Gold Holdings Sharply

A prominent example of this trend is the Reserve Bank of India (RBI). In recent years, the RBI has significantly increased its gold holdings. In the financial year 2024 to 2025, it added 57.5 tonnes to its reserves. This was the largest annual addition in seven years and brought total gold holdings to a record 879.58 tonnes.

Gold now makes up nearly 12 to 13% of India’s total reserves, doubling from around 6% just a few years ago. The value of these holdings rose to ₹6.68 lakh crore by the end of March 2025, up from ₹4.39 lakh crore the previous year. A global gold rally of nearly 30% and a depreciation in the rupee significantly boosted this figure. Within the RBI’s Banking Department alone, the value of gold surged 57% to ₹4.31 lakh crore.

Why are Central Banks Hoarding Gold? 

Traditional safe havens such as United States Treasuries are facing growing scrutiny. High inflation, mounting public debt, and increasing currency volatility are making fiat assets appear less reliable.

Gold, on the other hand, carries no counterparty risk. It does not rely on the creditworthiness of a government or financial institution. It exists independently of the digital financial system and retains value over time. For central banks seeking financial resilience, it is becoming a preferred reserve asset.

A Possible Recalibration of the Global Financial System

The current wave of central bank gold buying may be more than a defensive move. It could indicate the early stages of a structural shift in the global monetary landscape. As confidence in fiat systems weakens, some speculate that gold may play a larger role in a new multi-polar currency environment.

There are discussions about a diversified reserve structure that includes tangible assets like gold. While it is too early to predict the future of the global reserve system, the actions of central banks suggest that preparations are underway for major changes.

Conclusion

Central banks are rapidly increasing their gold reserves in response to rising global risks, geopolitical tensions, and weakening trust in fiat currencies. This shift highlights gold’s growing role as a reliable store of value and a strategic shield against financial uncertainty.

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