Central Banks and Gold: A Strategic Relationship

Why Do Central Banks Hold Gold?

Central banks hold gold as part of their foreign‑exchange reserves because the metal serves as a store of value, a hedge against inflation and a buffer during geopolitical crises. Surveys by the World Gold Council and OMFIF indicate that gold’s role as a store of value and hedge against inflation and geopolitical risk are key reasons for its inclusion in reserves. Research also suggests that countries facing financial sanctions from the United States and its allies tend to increase their gold holdings.

Recent Buying Trends

Official sector demand surged in recent years. Data compiled by the World Gold Council show that central banks purchased 863.3 tonnes of gold in 2025, down from a record 1,092 tonnes in 2024 but still far above the 2010–2021 annual average of 473 tonnes. This made 2025 the fourth‑largest year for central‑bank gold buying on record. Purchases rebounded in the fourth quarter of 2025, rising 6 % quarter‑over‑quarter to 230 tonnes.

Poland led reported buyers, adding 102 tonnes and raising its holdings to around 550 tonnes. Kazakhstan added 52 tonnes—its biggest annual increase since 1993—while Brazil bought 43 tonnes during the second half of 2025. Turkey and the Czech Republic continued steady accumulation. China’s official data showed a slower pace, with a 27‑tonne increase in 2025 and 14 consecutive months of additions. However, the World Gold Council noted that about 57 % of total central‑bank purchases were unreported, meaning some institutions added gold without immediate disclosure.

Implications for Traders

Central bank buying provides a price floor and signals confidence in gold’s long‑term value. Even when high prices encouraged caution, gold overtook U.S. Treasuries in late 2025 to become the largest reserve asset by value. Surveys show that 95 % of central banks expect global gold reserves to increase over the next 12 months. Traders should monitor central‑bank reports and World Gold Council updates, as large purchases or sales can influence market sentiment and long‑term supply–demand balances.