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Central Banks Are Not Buying Gold Without Reason

Amid continually rising prices, global central banks remain among the largest gold buyers.

Their purchases exceeded 1,000 tonnes per year during 2022–2024. Although this declined to 863 tonnes in 2025, accumulation continued with purchases of approximately 244 tonnes in the first quarter of 2026.

The scale is quite significant. Demand from central banks now accounts for approximately 20.4% of total global gold demand, not far from jewellery demand which stands at around 25%.

This means that gold movements are no longer influenced solely by consumers and investors. Gold is increasingly being treated as a strategic asset in the management of national reserves.

Why Do Central Banks Keep Buying?

For central banks, gold is not an asset for pursuing short-term gains. Its role is more closely aligned with protection against unpredictable risks.

Several considerations include:
- Inflation and currency purchasing power decline
Gold can help preserve the value of reserves when inflation rises or confidence in a currency weakens.
- Geopolitical uncertainty
Gold does not depend directly on the payment capacity of a specific country or institution.
- Diversification of foreign exchange reserves
Increasing gold holdings can reduce reliance on a single currency, particularly the US dollar.
- Long-term reserve management
Gold has a broad global market and has been used as a store of value across generations.

The United States still holds the world's largest gold reserves at approximately 8,134 tonnes, followed by countries such as Germany, Italy, France, Russia, and China.

However, the more important story is not just who holds the most gold. The direction also matters.

A World Gold Council survey shows that 89% of central banks expect global gold reserves to increase within the next 12 months. 45% expect their own institutions to purchase more gold, while 84% believe the proportion of gold in global reserves will continue to grow.

For investors, this accumulation does not mean gold prices will necessarily always rise. Gold can still correct due to changes in interest rates, US dollar movements, and market sentiment.

However, central bank purchases signal that gold still has a strategic function when risks related to inflation, geopolitics, and currencies increase.

If countries place gold as an important part of their long-term reserves, the next question becomes relevant for investors.

What role should gold play in your portfolio?

Source: World Gold Council and Bloomberg, processed by Syailendra Research.