Why Are Central Banks Hoarding Gold Like Never Before: All You Need To Know

Central banks across the world are constantly hoarding more and more gold and it is a signal for something bigger at play.

According to Chakravarthy V, a wealth advisor, "Central banks are now buying over 1,000 tons of gold a year. That’s more than 1 in every 3 gold bars mined globally. It’s not just a trend—it’s a signal," he wrote in a post on LinkedIn.

What Is Really Happening?

While gold has quietly held its place in the reserves of central banks as a traditional source of value, something changed in 2022.

Geopolitical tensions rose, inflation surged and the reliability of fiat currency was also questionable at the time. This is when central banks started shifting towards physical assets like gold with an urgency.

What is happening now is not just a minor portfolio adjustment but a "shift in mindset," Chakravarthy V said, pointing to the Reserve Bank of India (RBI) as a prime example.

A few years ago, gold constituted nearly 6% of India's reserves and that share has doubled to almost 12-13%.

In the fiscal year 2024-25, the central bank added 57.5 tonnes of gold, which is its largest annual purchase in seven years - taking the total holdings to a record 879.58 tonnes.

The value of this revenue increased to Rs 6.68 lakh crore for as of March 31, 2025, up from Rs 4.39 lakh crore during last year.

Additionally, there has been a 30% increase in gold prices, along with the depreciation of the value of the rupee, which amplified the value of gold's stockpile.

What Are The Other Factors Behind This?

This massive build-up is a reaction to a converging set of global risks including the freezing of Russia's foreign reserves in response to the Ukraine war exposed the vulnerability of holding assets in Western currencies.

Gold is appealing as a seizure-proof asset, and it is increasingly positioning itself as a common geopolitical tool. During conditions of inflation, currency volatility and rising debt levels, advanced economies have increased their reliance on gold.

There is also no counterparty risk in gold as it does not depend on the solvency of a government or a bank, existing outside of the digital financial system and holding its value across decades.

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