Something big is happening in the financial world. For the first time in over three decades, central banks globally are holding more gold than US government bonds. This isn’t just a minor shift; it’s a major reevaluation of how nations manage their financial security. Imagine countries traditionally filling their ‘treasure chest’ with US dollars, euros, and especially American government bonds, known as Treasuries. Now, a glistening new leader has emerged: gold.
The numbers paint a clear picture of this evolving landscape. According to the European Central Bank’s ‘International Role of the Euro 2025’ report, central banks collectively possess a staggering 36,000 tonnes of gold. At today’s market prices, this immense stockpile is valued at over $3.6 trillion. Contrast that with their holdings in US Treasuries, which stand at $3.8 trillion, based on the US Treasury’s June 2024 survey. The gap is closing rapidly, thanks in no small part to the surging price of gold.
Indeed, the price of gold has been a significant driver in this transformation, soaring above $3,500 an ounce this year, according to data from Reuters. This remarkable increase has made gold an even more attractive asset. But the big question remains: why are central banks suddenly turning to gold with such fervor?
Experts point to three compelling reasons behind this global shift towards gold.
First, there’s the undeniable appeal of gold as an asset that cannot be frozen or seized. This became a stark reality for many nations after Russia’s dollar and euro reserves were blocked in 2022 following its war in Ukraine. This unprecedented event sent a powerful message, prompting countries to seek out ‘sanctions-proof’ assets. Gold fits this bill perfectly, offering a level of sovereign security that traditional fiat currencies cannot.
Second, concerns about America’s rising debt levels are growing. Many central banks are becoming increasingly cautious about concentrating too much of their reserves in US bonds. The stability of the US financial system, while still robust, is being questioned in some circles, leading to a desire for greater diversification and less exposure to potential fiscal risks associated with national debt. This push for diversification is key.
And third, diversification plays a crucial role. Central banks inherently want to spread risk. Holding a diverse mix of currencies and assets, including gold, helps countries weather economic storms and geopolitical uncertainties. This strategy reduces reliance on any single currency or government bond, promoting greater overall financial resilience. The appeal of gold in this context is clear.
The data from the World Gold Council (WGC) vividly illustrates the strength of this trend. Central banks purchased an impressive 1,082 tonnes of gold in 2022. This was followed by 1,037 tonnes in 2023, and another 1,045 tonnes in 2024. These figures are more than double the annual purchases recorded just a decade ago, showcasing a sustained and accelerating appetite for gold.
While the pace of buying slowed slightly in 2025, it still remained remarkably high. In the first quarter, 244 tonnes were added, with an additional 166 tonnes in the second quarter. Analysts at Metals Focus, a London consultancy, project total purchases for the year to hover around 1,000 tonnes, indicating no significant slowdown in the demand for gold.
Surveys further reinforce the expectation that this trend will continue its upward trajectory. The WGC’s ‘Central Bank Gold Reserves Survey 2025’ revealed that a significant 43 per cent of central bankers intend to add more gold to their reserves in the coming year. Moreover, an overwhelming 95 per cent of respondents believe that global gold holdings will continue to rise. This clearly signals a long-term commitment to gold as a core reserve asset.
India, too, has been a proactive participant in this global gold rebalancing. The Reserve Bank of India has been steadily increasing its gold reserves. By March 2025, India held approximately 880 tonnes of gold, accounting for about 12 per cent of the country’s total reserves. This strategic move helps boost confidence in the Indian rupee during periods of currency volatility.
However, India’s increased gold holdings also present a unique challenge domestically. Higher global prices for gold can clash with India’s traditionally strong domestic demand for the precious metal. This creates an interesting dynamic where national financial strategy meets deep-seated cultural preferences. The global shift towards gold is undeniably creating a fascinating new chapter in international finance.