Alberta West News: Why Are Central Banks Buying Gold?

Central banks worldwide are engaged in a historic gold-buying spree, accumulating over 1,000 tonnes annually for four consecutive years (2022-2025). This sustained institutional demand represents the most aggressive gold accumulation since the end of the Bretton Woods system in 1971. The phenomenon reflects a fundamental realignment of global monetary strategy driven by multiple converging forces.reuters+2

De-Dollarization and Reserve Diversification

The primary driver behind central bank gold purchases is a deliberate effort to reduce dependence on the U.S. dollar. The dollar's share of global foreign exchange reserves has declined to 58.4% in the first quarter of 2025, down from approximately 71% in 2000. Meanwhile, gold now accounts for approximately 19% of central bank reserves globally, still below the post-Bretton Woods average of 29%, indicating substantial room for continued accumulation.aubullion+4

Central banks are particularly motivated by concerns about dollar weaponization—the use of the dollar-dominated financial system as a tool for imposing sanctions and exerting geopolitical pressure. The freezing of over $300 billion in Russian foreign reserves following its invasion of Ukraine served as a stark catalyst, demonstrating that dollar-denominated assets carry political risk. This event accelerated what was already an emerging trend, prompting even U.S.-aligned nations to reconsider their reserve composition.indiatoday+5

As one Polish central bank official stated, "In these difficult times of global turmoil and the search for a new financial order, gold is the only safe investment for state reserves".investing

Protection Against Geopolitical Risk and Sanctions

Gold offers unique advantages as a politically neutral asset that no single nation controls. Unlike currency reserves that can be frozen or seized, physical gold stored domestically provides immunity from sanctions. This characteristic has become increasingly valuable in an era of heightened geopolitical tensions and economic fragmentation.apg+4

Countries with less geopolitical alignment with Western powers have been particularly aggressive buyers. China, Russia, Turkey, India, and Poland have emerged as leading purchasers, collectively adding hundreds of tonnes to their reserves. China's central bank added gold for 11 consecutive months through September 2025, bringing official reserves to 2,303.5 tonnes, though analysts suspect actual holdings may be significantly higher.goldsilver+5

Inflation Hedge and Financial Stability

Gold serves as a hedge against inflation and currency devaluation, protecting national wealth when fiat currencies decline in purchasing power. With global debt levels rising and fiscal pressures mounting across developed economies, central banks view gold as a reliable store of value that maintains purchasing power across economic cycles.globalxetfs+3

The Congressional Budget Office forecasts U.S. debt-to-GDP will rise above 155% by 2055, while similar indebtedness trends occur globally. This deteriorating fiscal outlook reduces confidence in sovereign bonds and increases the probability that governments will pursue inflationary policies to meet obligations, further enhancing gold's appeal as a reserve asset.research-center.amundi+1

Absence of Counterparty Risk

Unlike government bonds or currencies, gold carries no default risk and does not depend on any institution's promise to pay. It is a tangible physical asset whose value is intrinsic rather than tied to any sovereign entity. This characteristic provides assurance during periods of banking system stress or sovereign debt concerns—conditions that have characterized recent years.omfif+3

Leading Buyers and Strategic Objectives

Poland has emerged as the most aggressive buyer in 2025, accumulating 67 tonnes through August and adding another 16 tonnes in October. The National Bank of Poland has announced plans to increase gold to 30% of total reserves, up from the current 26%, as part of a strategy to strengthen financial sovereignty amid regional geopolitical tensions.discoveryalert+3

China continues systematic accumulation despite officially reporting only modest increases. With gold representing just 4-5% of China's $3.2 trillion in foreign exchange reserves, substantial room exists for continued purchases. Analysts believe actual holdings may be 3,000-4,000 tonnes or higher, as unreported purchases through state entities and Shanghai's bonded warehouses suggest far greater accumulation.discoveryalert+2

Turkey has made gold purchases for 15 consecutive months as of mid-2024, accumulating 52 tonnes year-to-date and bringing gold to approximately 35% of reserves. This aggressive strategy reflects currency stability concerns and efforts to reduce external vulnerabilities.discoveryalert+2

India's Reserve Bank added 45 tonnes in the first eight months of 2024, marking eight consecutive months of accumulation and positioning India as the second-largest buyer that year. India's purchases reflect both diversification objectives and cultural affinity for gold as a monetary asset.benefitsandpensionsmonitor+1

Russia holds approximately 2,333 tonnes in official gold reserves, representing roughly 30% of total reserves—up from 22% before Western sanctions. Russia has also broken new ground by explicitly incorporating silver into state reserves as part of its de-dollarization initiatives, marking the first time a major central bank has publicly declared silver purchases during the current precious metals bull market.markets.chroniclejournal+2

Market Impact and Price Support

Central bank demand now represents nearly 25% of total gold demand, making the official sector the third-largest consumer after jewelry and physical investment. This institutional buying creates what analysts call a "central bank gold put"—a structural price floor that limits downside potential.markets.chroniclejournal+4

Unlike private investors who trade tactically, central banks accumulate strategically and are largely price-insensitive, continuing purchases even at record price levels around $4,000 per ounce. This consistent, non-speculative demand has contributed to gold's sustained rally, with prices up 29% in 2025 and reaching multiple all-time highs.discoveryalert+4

Future Outlook

The World Gold Council's 2025 Central Bank Gold Reserves Survey indicates that 95% of central banks expect global gold reserves to increase over the next year, with 72% anticipating their holdings will be "moderately higher" over the next five years. Additionally, 76% of central banks intend to increase gold holdings over the next five years, while 75% plan to reduce exposure to dollar-denominated assets.discoveryalert+2

The structural drivers behind this trend—fiscal deterioration, geopolitical fragmentation, persistent inflation concerns, and the gradual emergence of a multipolar monetary system—suggest central bank gold accumulation will continue at elevated levels for years to come. This represents not merely a tactical adjustment but a fundamental realignment in how nations manage reserves and protect monetary sovereignty in an increasingly uncertain global landscape.discoveryalert+5

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Wednesday, November 12, 2025

Why Are Central Banks Buying Gold?