Why Central Banks Are Buying More Gold Than US Bonds After 30 Years? In a major shift in global financial strategy, central banks across the world now hold more gold than US Treasuries for the first time since 1996. This development reflects how countries are diversifying their reserves amid economic uncertainties, geopolitical tensions, and concerns about the stability of the US dollar.
According to recent data from the US Treasury Department, foreign central banks and official institutions held $2.26 trillion in Treasury securities at the end of July 2025. In contrast, the value of gold reserves has surged past this figure, largely driven by rising gold prices and increased buying activity by emerging economies.
Why Central Banks Are Buying More Gold
Several factors have contributed to this historic shift:
- Geopolitical Risks: Ongoing conflicts, trade wars, and shifting alliances have led countries to look for safer, politically neutral assets.
- Currency Diversification: With increasing uncertainty around the US dollar’s dominance, many central banks have sought to diversify reserves.
- Inflation Hedge: Gold is traditionally viewed as a strong hedge against inflation, which remains elevated in several parts of the world.
- US Debt Concerns: Growing US fiscal deficits and rising debt levels have raised concerns about the long-term value of US Treasuries.
China, India, Russia, and several Middle Eastern countries have been among the most active gold buyers over the past few years. Analysts believe this trend is likely to continue, especially if global interest rates begin to decline in 2025 and beyond.
Impact on Global Markets
The shift has broad implications for global finance:
- US Treasuries Demand May Decline: Lower demand for Treasuries could impact US borrowing costs over time.
- Gold Prices Likely to Stay Elevated: With central banks buying aggressively, gold prices may remain strong, supporting mining companies and investors.
- Shifts in Power Dynamics: As countries move away from dollar-denominated assets, the global financial system could gradually become more multipolar.
Gold has already seen significant price movement, recently trading above $2,400 per ounce — near its all-time high. If this upward trend continues, it could further encourage central banks to build larger gold reserves.
What Investors Should Watch
For retail and institutional investors, this trend suggests:
- Gold ETFs and Mining Stocks Could Benefit from sustained buying pressure.
- Bond Market Volatility May Increase as Treasury demand dynamics evolve.
- Currency Markets Could See Shifts if diversification away from the dollar accelerates.
Experts caution, however, that this shift does not mean Treasuries are no longer important. The US bond market remains the largest and most liquid in the world. But the move signals a gradual rebalancing in how countries perceive risk and value in their foreign exchange reserves.
Looking Ahead
Financial analysts suggest that if geopolitical tensions continue and inflation remains sticky, central banks may further increase their gold allocations. This could mark the beginning of a long-term trend where gold plays an even bigger role in global monetary policy, potentially reshaping the way international trade and finance operate in the decades ahead.