Are gold reserves becoming the new anchor of global risk?

Forget tech stocks and Treasury yields for a moment. The real story shaking up global finance isn’t flashy - it’s heavy, yellow, and thousands of years old. Gold, once relegated to dusty vaults, could be making a serious comeback at the heart of central bank strategy.

With the euro dethroned as the world’s second-largest reserve asset and over a thousand metric tonnes snapped up by central banks for a third year running, this isn’t looking like a trend anymore - it’s looking like a quiet revolution. 

In an age of inflation shocks, sanctions, and rising geopolitical tension, gold is no longer just a hedge. It’s looking more and more like the new anchor in a world adrift.

Gold surpasses euro (quietly)

According to a fresh report from the European Central Bank (ECB), gold now makes up 20% of global central bank reserves, overtaking the euro’s 16% share and sitting just behind the U.S. dollar at 46%. The scale of this shift is staggering.

Central banks bought over 1,000 metric tonnes of gold in 2024 - for the third year in a row. That’s double the average yearly haul seen in the 2010s and about one-fifth of the world’s entire annual gold production. It also pushed official gold holdings to 36,000 mt, nearly back to the post-WWII highs seen during the Bretton Woods era when currencies were pegged to the dollar, and the dollar to gold.

So yes - the world’s financial foundations are tilting, and gold is suddenly right at the centre of it all.

Gold as a safe haven asset and more

Sure, gold’s been on a tear. Prices rose 30% in 2023, and they’re up another 27% in 2024, recently hitting a record high of $3,500 per ounce. But this is about more than just shiny returns.

Gold’s growing appeal lies in what it isn’t: it’s not tied to any government, doesn’t carry counterparty risk, and can’t be frozen, sanctioned, or manipulated the way fiat reserves can.

That last bit is crucial. After the Russia-Ukraine war broke out in 2022, the West froze around $280 billion of Russia’s central bank reserves. That moment rattled many emerging economies. Suddenly, the idea of parking wealth in foreign currencies started to look like a gamble. Gold, on the other hand? No strings attached.

This sentiment has caught on fast - especially in emerging and developing countries. The ECB noted that these nations now view gold as a sanction-resistant asset, and a more trustworthy alternative amid rising doubts about the durability of the dollar, euro, and other major currencies.

Gold market trends 

Historically, gold prices moved opposite to real yields - when yields rose, gold fell. But that relationship has broken down since early 2022. What’s changed?

Markets now view gold less as a simple inflation hedge, and more as a hedge against global disorder: wars, sanctions, trade fragmentation, and the ever-growing risks of currency weaponisation.

Recent market data supports this. After the U.S. Consumer Price Index (CPI) for May came in below expectations, suggesting cooling inflation, gold prices surged past $3,350, briefly reaching $3,380 before consolidating. 

Traders are betting on a September Fed rate cut, which would typically boost non-yielding assets like gold.

Add to that the falling U.S. dollar index (DXY), now near four-day lows, and U.S. Treasury yields dropping by five basis points, and you’ve got even more tailwinds for bullion.

Geopolitics, tariffs, and trade talks: A recipe for gold’s surge

Beyond inflation, other global uncertainties are keeping gold in demand:

• Middle East tensions are simmering again, with President Trump warning that Iran is becoming more aggressive in nuclear talks.
  
• U.S.-China trade negotiations are dragging on, with frameworks agreed but waiting for sign-off from Trump and Xi Jinping.
  
• Even domestic U.S. politics and tariffs are making markets jittery, further fuelling safe-haven demand.

In short, the global mood is edgy - and gold thrives in that kind of environment.

Is gold buying slowing down or just a breather?

While central bank buying has been massive, there are signs it might be slowing - at least temporarily. According to the World Gold Council and ING, Q1 2025 saw a 33% drop in gold purchases quarter-on-quarter, with China’s pace notably easing.

But analysts aren’t ringing alarm bells just yet. As Janet Mui of RBC Brewin Dolphin puts it, "Given the strong run in gold prices, the momentum in gold buying could slow. But on a long-term basis, the uncertain geopolitical backdrop and desire for diversification will support the accumulation of gold as reserves."

In other words: central banks may pause, but they’re not walking away. The trend, one of long-term trust in gold, remains firmly intact.

Well, it certainly looks that way. It’s now more widely held than the euro, inching back to Cold War-era stockpile levels, and being used as a shield against the risks of global power plays.

For something that doesn’t pay interest and needs a vault, gold is proving it still has a starring role to play - not just as an old relic of wealth, but as the new anchor in a volatile, unpredictable world.

Gold price forecast

At the time of writing, Gold sees some sell pressure as prices approach a major resistance zone - hinting at a price drawdown. However, volume bars show dominant buy pressure with sellers offering little response - hinting that we could see a price uptick. Should the uptick materialise, buyers could be held at the $3,400 price level, with a breach above that level, potentially finding resistance at the $3,500 all-time high. Conversely, if we see a drawdown, prices could find support at the $3,245 and $3,170 support levels.

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