Sovereign reserves continue to load up on bullion at the fastest pace since the 1960s. Here is what is driving the trend.
Sovereign reserves have added more gold to their vaults in the last twenty-four months than in any comparable period since the dismantling of Bretton Woods. The People's Bank of China, the Reserve Bank of India and the central banks of Türkiye and Singapore have led the buying, but the trend is now visible across more than three dozen emerging-market institutions.
The motive is straightforward. After the freezing of Russian foreign reserves in 2022, every reserve manager outside the G7 was forced to confront the political risk of dollar-denominated assets. Gold sits on no one's balance sheet, settles instantly, and cannot be sanctioned. It is the only reserve asset that meets all three criteria.
“The motive is straightforward.”
What is less appreciated by retail investors is the scale of the resulting price floor. With central banks absorbing roughly a quarter of new mine supply and showing no sign of slowing, the bid for physical metal is structurally underwritten in a way it has not been since the 1960s.
We have written before about the distinction between paper gold and physical metal. Periods of sovereign accumulation are when that distinction matters most: ETFs continue to leak ounces while the metal itself becomes scarcer in dealer vaults. The premium gap will widen.
