Why Central Banks Are Buying More Gold Than Ever
Gold is becoming increasingly important in global investment portfolios, particularly among central banks, which manage the world’s finances. Over the past 75 years, their patterns of gold buying have provided valuable insights into how global economies respond during times of change. Currently, we seem to be at the brink of another significant shift.
A Look Back at Gold Buying History
After World War II, central banks began adding gold to their reserves. In the 1960s, for instance, France returned with nearly 3,000 tons of gold. However, the 1970s brought substantial changes: the US removed the gold backing from its currency while countries like the UK and Switzerland sold off approximately 1,600 tons. This era was marked by net selling, culminating in the collapse of the London Gold Pool in 1968 and signaling the end of the gold standard.
The Trend Changes After 2008
Following the 2008 global financial crisis, central banks started buying gold again. On average, they purchased between 600 and 700 tons of gold each year. Given that global gold production hovers around 3,000 tons annually, central banks accounted for 20–25% of this supply. Throughout this period, the market remained relatively stable, and gold prices rose gradually.
Post-2022: A Sharp Increase in Buying
Since February 2022, central banks’ gold purchases have soared to over 1,000 tons per year. This surge indicates that many countries are growing uncertain about holding too much foreign currency or storing their gold abroad. As a result, there is a growing preference for real, physical assets like gold. For example, India’s central bank (RBI) has increased its gold holdings from about 6% of its total foreign exchange reserves to nearly 12–13%.
Prepare for a Changing Financial World
We may be approaching a significant global transition—possibly the end of dollar dominance or the emergence of a new basket of reserve currencies. Such changes will likely introduce high volatility across various asset classes, including equities. Holding gold can help safeguard your wealth during this uncertain period.
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WeekendInvesting launches – The Momentum Podcast
This episode of THE MOMENTUM PODCAST features Manubhav, a third-generation real estate professional, sharing his unique journey navigating both worlds.
Discover:
✅ FROM PROPERTY TO PORTFOLIO: Manubhav’s transition from his family’s established real estate business to exploring equity investments.
✅ MARKET WISDOM: His candid experiences with market swings, including COVID-19’s impact on his SIPs, and lessons learned from F&O and smallcase.
✅ THE BIG COMPARISON: A fascinating look at real estate vs. equity returns, featuring real-world numbers from his family’s 40-year property investment.
✅ UNCOMMON INSIGHTS: Why gold is a family favorite and the surprising state of equity investing in smaller Indian towns.
