Central Bank Demand and Inflation Fears Support Gold Stability

Central banks worldwide are on track for a fourth consecutive year of massive gold purchases, with projections of around 1,000 metric tons acquired in 2025.

This surge reflects a strategic shift away from dollar-denominated reserves, driven by declining confidence in the U.S. dollar and growing geopolitical instability.

Notably, countries like Kazakhstan, Turkey, and Poland have led recent acquisitions, underscoring the global breadth of this trend.

Despite a modest 8% decline from last year’s record, central banks remain the third-largest consumers of gold, accounting for nearly a quarter of total demand.

Their steady buying has provided crucial support for gold prices, even as jewelry demand softens in response to the price rally.

Inflation and Geopolitical Risks Fuel Gold’s Appeal

Persistent inflation fears and heightened geopolitical tensions are key drivers behind central banks’ sustained appetite for gold. The World Gold Council’s 2025 survey found that 95% of central banks expect to increase their gold reserves over the next year, citing the metal’s proven resilience during crises and its effectiveness as a portfolio diversifier.

Concerns about rising prices, interest rate volatility, and the weaponization of foreign reserves through sanctions have further elevated gold’s status as a safe-haven asset.

Central banks from both emerging and advanced economies are increasingly wary of the risks posed by inflation and global instability, prompting them to expand their gold holdings as a defensive measure.

Did you know?
Central banks have more than doubled their annual gold purchases since 2018, making them a major force in the global gold market. Their buying spree has coincided with some of the most turbulent periods in recent economic history.

Gold Prices Hold Firm Amid Policy Uncertainty

Gold prices have surged by nearly 30% in 2025, reaching record highs above $3,500 per ounce in April before stabilizing around $3,346.50 per ounce in July.

Central bank demand, a weakening dollar, and expectations of further U.S. Federal Reserve rate cuts have fueled the rally.

Market analysts anticipate continued strength in gold prices, with some forecasts suggesting a push toward $4,000 per ounce within the next twelve months.

We expect the combination of robust central bank buying and persistent inflation risks to underpin gold's stability through the remainder of the year.

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De-Dollarization Trends Reshape Reserve Strategies

The move away from U.S. dollar assets is reshaping global reserve management. Central banks are diversifying into gold to reduce reliance on the dollar, which has seen its share of global reserves decline recently.

This de-dollarization trend is reinforced by unpredictable U.S. fiscal policies, rising national debt, and trade tensions, all of which have diminished the dollar’s traditional safe-haven appeal.

As central banks recalibrate their portfolios, gold’s role as a strategic reserve asset is becoming increasingly prominent. This shift is likely to have lasting implications for global financial stability and currency markets.

Jewelry Demand Softens but Central Bank Support Remains Strong

While jewelry fabrication has declined due to high prices, central bank demand continues to provide a strong floor for the gold market.

Major buyers such as China, Poland, and Kazakhstan have maintained steady inflows, helping to offset weakness in other segments of demand.

Analysts expect central banks to remain net buyers in the coming year, with their actions playing a pivotal role in sustaining gold’s stability amid ongoing economic and political turbulence.