Gold is a metal which everyone wants to buy… From making jewelery to being a safe investment, gold works as a better option. It has risen rapidly in recent times and has given returns of 55 to 65 percent in just one year. Central banks around the world are also buying a lot of it. They are quietly increasing their gold reserves at a rapid pace, but the question arises why?
Central banks will collectively borrow about 900 tonnes in 2025. Sleep Buying is expected, which will be the fourth consecutive year of above average purchasing. This has never been seen before. A shocking thing has come to light in the World Gold Council’s Central Bank Gold Reserve Survey 2025. According to this, 76 percent of central banks expect that five years from now they will have a higher proportion of gold, while 73 percent expect that the share of US dollars in global reserves will decrease.
It clearly means that the central banks are purchasing more gold by depreciating the dollar. Now the question is also arising that whether the influence of dollar is decreasing and gold will be more important? Let us understand from the experts what is the matter with gold and dollar?
…that’s why there is more faith in gold
According to the economist in the India Today report, the global economy is currently growing at less than 2 percent and inflation is at its peak. In this environment, countries are moving towards safe assets. When central banks lose confidence in dollars or fiat assets, they look for some concrete solution.
Unlike bonds or currencies, gold has no counterparty risk. This means that it cannot default, be affected by inflation, or be frozen by sanctions. For this reason, central banks are increasing gold reserves.
Why are central banks buying gold so fast?
Manoranjan Sharma, Chief Economist of Informix Ratings, said that the increase in gold reserves by central banks is much more than the traditional safe-haven objectives. Sharma said that holding gold provides protection from sanctions, increases confidence in the policy, increases financial stability and increasingly provides flexibility for independent policy in the financial system.
Sharma said gold also acts as a protection against financial repression and the uncertainties of the emerging digital currency outlook. In other words, this is a deliberate structural step, this much buying of gold is not a hedge against a short-term crisis.
Is the reign of the dollar coming to an end?
According to the IMF’s COFER database, the US dollar still accounts for about 58% of total global reserves, but this share is continuously declining. The reign of the dollar is being challenged by economic factors as well as political factors. Recent financial sanctions imposed on Russia and threats of similar measures against other countries have made many governments concerned about holding large amounts of US assets.
In contrast, gold can be stored domestically, traded globally and is not tied to the policies of any one country. This is attractive for emerging market economies that want to differentiate themselves from Western powers.
Why is China doing this regarding gold?
The People’s Bank of China has been one of the most aggressive buyers of gold in recent years, adding gold to its reserves for 18 consecutive months through mid-2025. Economists see China’s gold purchases as part of a broader strategy to protect against potential US sanctions and support non-dollar trade within the BRICS+ bloc.
What will be the effect of this purchase?
Sharma said this continuous official buying, despite the rise in global interest rates, has led to a structural decline in gold prices. He further said that purchases by central banks establish gold as a reliable long-term asset, prompting both institutional and retail investors to increase investments through ETFs, mining equities and sovereign gold bonds.
Not only are the prices rising due to purchases by central banks, but inflationary volatility, the development of digital currencies and intense geopolitical competition are re-establishing gold as the main pillar of monetary sovereignty in this new era.
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