The world’s central banks now hold more gold than U.S. Treasuries for the first time in nearly 30 years, according to a new Bloomberg analysis. The precious metal topped $4,000 an ounce for the first time in history on October 10, but shed more than 6% of its value earlier this week as trade tensions eased.
Bullion prices soared to a record $4,300 per troy ounce on October 21st, before the market recorded its biggest single-day decline in more than a decade (Cryptopolitan) reported. Despite the correction, gold remains one of the best-performing assets in 2025, up nearly 50% year-to-date.
Central banks adopt gold to counter market uncertainty
Holdings of gold-backed exchange-traded funds (ETFs) soared in October, reaching their highest level in more than three years, according to data compiled by Bloomberg.
Central banks have been net buyers of gold for 15 consecutive years, but the pace accelerated after Russia’s invasion of Ukraine in 2022. Western sanctions froze most of Russia’s foreign exchange reserves in geopolitical retaliation, prompting other central banks to diversify away from the US dollar and expand their gold reserves.
The World Gold Council reported that the world’s central banks will buy more than 1,000 tonnes of bullion for the third year in a row in 2024, holding about a fifth of all the gold ever mined.
Many of the most aggressive buyers are countries that did not participate in the post-World War II Bretton Woods system, which established the dollar as the world’s reserve currency and was backed by gold.
The People’s Bank of China (the central bank) increased its holdings for 11 consecutive months through September. China’s central bank is also aiming to become a custodian for foreign sovereign gold reserves, Bloomberg reported. reported.
“China plays a key role in the continued rise in gold prices through central bank purchases, arbitrage, and increased speculative and safe-haven demand among Chinese households.” I wrote Thorsten Slok, chief economist at Apollo Global Management, said in a research note published last Tuesday.
Most of the world’s public gold has traditionally been kept in the vaults of the Bank of England, which currently hold more than 5,000 tonnes of the world’s total gold.
Morgan Stanley Research recently revised its 2026 price forecast upward to $4,400 per ounce from its previous estimate of $3,313. New forecasts suggest a further 10% rise from early October levels.
“We expect gold to rise further due to a weaker US dollar, strong ETF buying, continued central bank buying, and a backdrop of uncertainty that supports demand for this safe-haven asset,” said Amy Gower, metals and mining products strategist at Morgan Stanley.
The metal has a long history of bullish performance during periods of market turmoil, having breached psychological thresholds in every major crisis over the past two decades. It accelerated above $1,000 an ounce during the 2008 financial crisis, hit $2,000 an ounce during the COVID-19 pandemic, and soared to $3,000 after President Trump’s Emancipation Day tariff hike in April of this year.
Tariffs, inflation and Fed rates limit optimism
According to the World Gold Council, tariffs imposed by the Trump administration have increased Import costs have increased, increasing the risk of consumer price inflation in the global economy. The president’s public criticism of the Federal Reserve and persistent calls for looser interest rate decisions have undermined confidence in the central bank’s independence.
What investors expect is federal reserve system Amid growing economic uncertainty, interest rates will continue to be lowered by the end of the year. Historically, gold prices have risen on average by about 6% within two months of the start of a Fed rate cut cycle.
“Given all these factors, it is perhaps not surprising that gold is at the top of the list of priorities among commodities,” Gower added.
The decline in the US dollar is another factor contributing to the rise in gold prices. The price of bullion is set in dollars, and the weaker dollar makes it easier for foreign investors to buy gold. In mid-September, the dollar fell to its lowest level in three years against the world’s major currencies.
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