Central Banks Signal Renewed Interest in Gold as Reserves Diversify Away from the Dollar

Even though central bank demand for gold has eased slightly in recent months, following the metal’s near-parabolic rally to record highs above $4,000 an ounce, the sector remains one of the most influential forces shaping global gold markets.

At the London Bullion Market Association’s (LBMA) annual Global Precious Metals Conference, several central banks reaffirmed their strategic view of gold as a long-term reserve asset. Among them, South Korea’s central bank signaled that it is considering a return to gold buying.

Heung-Soon Jung, Director of the Reserve Investment Division at the Bank of Korea, noted that while the bank has not purchased gold since 2013, it is evaluating potential additions to its holdings over the medium and long term.

“The Bank will continue to monitor developments in both domestic foreign exchange markets and global gold trends to determine the timing and scale of any future investment,” Jung said. “Given gold’s historical role as an inflation hedge and its potential as an alternative to the U.S. dollar, it remains a compelling asset from a strategic, long-term perspective.”

Meanwhile, in an interview with Bloomberg on the sidelines of the conference, Aivo Andrianarivelo, Governor of Madagascar’s central bank, said that the country aims to quadruple its gold reserves from one tonne to four tonnes.

Over the past three years, central bank gold demand has surged by more than 1,000 tonnes, although analysts point out that most of this accumulation has been concentrated among a few major buyers — with China leading the trend. Still, many emerging economies remain overexposed to the U.S. dollar and are actively seeking to diversify their portfolios through gold and other tangible assets.

During the first half of 2025, central banks purchased approximately 415 tonnes of gold, down from about 525 tonnes in the same period of 2024. Despite the slowdown, the figure remains well above historical averages, and analysts expect total official-sector purchases to approach 900 tonnes by year-end.

The World Gold Council’s (WGC) annual survey, published in June, revealed that 43% of central banks plan to increase their official gold holdings this year, up from 29% in 2024, while an overwhelming 95% expect global gold reserves to continue expanding over the next 12 months.

Although spot prices have briefly slipped below the $4,000-per-ounce mark, most analysts agree that gold’s long-term fundamentals remain robust, supported by persistent central bank demand and its growing appeal as a strategic hedge against both monetary risk and geopolitical uncertainty.