Gold demand to hit new highs as central banks pivot away from dollar holdings
Central banks are diving headfirst into gold, driving demand to unprecedented heights as they pivot away from the US dollar in a bold de-dollarisation push.
This strategic scramble for the yellow metal, fuelled by geopolitical tensions, economic uncertainty, and dwindling trust in traditional safe-haven assets, is set to propel gold demand to record levels in 2025, with prices soaring to new peaks.
The current gold-buying spree is not happening in a vacuum. It coincides with a dramatic surge in gold prices, which have already risen 29 per cent year-to-date, hitting an all-time high of $3,500 per troy ounce in April. Despite the price rally, demand from central banks has remained resilient.
Economists and precious metals analysts argue that the global gold rush — led by the very institutions that once anchored their wealth in dollars — reveals a profound transformation in the architecture of international finance.
Metals Focus, a leading consultancy, reported that first-quarter buying in 2025 was in line with the 2022–2024 quarterly average, underscoring persistent demand even at elevated price points. The consultancy projects in its annual gold market outlook that central banks will snap up 1,000 metric tons of gold in 2025, marking the fourth consecutive year of robust official sector buying.
While this forecast reflects an 8.0 per cent dip from the record 1,086 tonnes purchased in 2024, demand remains historically elevated, underscoring gold's enduring appeal as a politically neutral, non-liability-bearing reserve asset. Poland, Azerbaijan, and China lead the charge, with consistent inflows also noted into Iran, signaling sustained activity by the Central Bank of Iran.
Metals Focus projects an average gold price of $3,210 per ounce in 2025 — a 35 per cent jump — fuelled by ongoing uncertainty and eroding confidence in the US dollar and Treasuries.
The People's Bank of China has been a key player, boosting its gold reserves for the seventh straight month in May, adding 60,000 troy ounces to bring its total to 73.83 million fine troy ounces, according to recent data. This move reflects China's determined push to diversify holdings amid price fluctuations. Globally, sovereign players are acquiring roughly 80 metric tons of gold monthly, worth about $8.5 billion at current prices, analysts at Goldman Sachs Group Inc estimate.
China's foreign-exchange reserves also edged up to $3.285 trillion in May from $3.282 trillion in April, signaling a broader strategy to bolster financial resilience.
'The drivers that have underpinned de-dollarisation in recent years remain firmly in place,' Metals Focus stated. President Trump's unpredictable policy stance, his public criticism of Federal Reserve Chair Jerome Powell, and the deteriorating US fiscal outlook have deepened doubts about the dollar and Treasuries as ultimate safe-haven assets. Elevated geopolitical tensions since the start of his administration have further dimmed the appeal of US assets, pushing central banks toward gold as a reliable hedge. This trend dovetails with broader concerns about the US dollar's waning global dominance.
JPMorgan CEO Jamie Dimon and Tesla CEO Elon Musk have sounded alarms over fiscal instability and geopolitical risks, while Coinbase CEO Brian Armstrong has boldly suggested bitcoin could one day supplant the dollar as the global reserve currency.
Meanwhile, alliances like Brics and the Shanghai Cooperation Organisation are accelerating de-dollarisation, increasingly conducting trade in national currencies to reduce reliance on the US dollar.
Gold's allure extends beyond central banks. Investors, rattled by trade wars and uncertainty surrounding US assets, have flocked to the metal as a haven, propelling prices to near-historic highs. Though the rally cooled slightly with easing global trade tensions, bullion remains a cornerstone of stability in turbulent times. The World Gold Council notes that global gold demand, including jewelry, investment, and industrial uses, reached 4,899 tons in 2024, a record, and 2025 is poised to surpass this as central bank purchases sustain momentum. Exchange-traded funds backed by gold have also seen inflows, with holdings rising 5 per cent year-to-date to 3,200 tons, reflecting investor appetite.
Looking ahead, the demand outlook remains robust. Metals Focus highlights that economic uncertainty, coupled with central banks' strategic shift, will keep gold in high demand. Emerging markets, wary of currency volatility and sanctions risks, are stockpiling gold to safeguard reserves. The International Monetary Fund reports that gold's share of global reserves climbed to 15 per cent in 2024, the highest in decades, and this trend is expected to persist.
Analysts predict that if de-dollarisation accelerates, annual central bank demand could stabilise above 900 tons for the next five years, reinforcing gold's role as a cornerstone asset. They argue that central banks' relentless buying, paired with investor flight to safety, is rewriting the rules of global finance, positioning the yellow metal as the ultimate bulwark against uncertainty.
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