{"id":12766,"date":"2025-09-14T22:40:57","date_gmt":"2025-09-14T22:40:57","guid":{"rendered":"https:\/\/tezgyan.com\/index.php\/2025\/09\/14\/why-central-banks-around-the-world-hoard-gold-and-will-prices-of-yellow-metal-fall-business-news\/"},"modified":"2025-09-14T22:40:57","modified_gmt":"2025-09-14T22:40:57","slug":"why-central-banks-around-the-world-hoard-gold-and-will-prices-of-yellow-metal-fall-business-news","status":"publish","type":"post","link":"https:\/\/tezgyan.com\/index.php\/2025\/09\/14\/why-central-banks-around-the-world-hoard-gold-and-will-prices-of-yellow-metal-fall-business-news\/","title":{"rendered":"Why Central Banks Around The World Hoard Gold, And Will Prices Of Yellow Metal Fall? | Business News"},"content":{"rendered":"


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Central banks hoard gold to insure themselves against inflation, currency collapse or geopolitical turmoil. Interestingly, gold in vaults does not directly influence interest rates<\/h2>\n
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Much of gold\u2019s recent surge is tied to expectations that the US Federal Reserve will start cutting rates later this year. (Getty Images)<\/p>\n<\/figure>\n

Gold glitters not just in jewellery shops but deep inside the vaults of central banks across the world. From New Delhi to Washington, London to Beijing, central banks remain some of the largest buyers and holders of the yellow metal. The question arises \u2013 in an era of digital money, crypto experiments, and high-tech financial markets, why are governments still stockpiling something as ancient as gold?<\/p>\n

The answer lies in a mix of economics, history, and geopolitics. Gold remains the ultimate safe-haven asset \u2014 immune to inflation, untouched by political games, and universally recognised as a store of value. But the way central banks buy, store, and use gold has evolved over the decades, reflecting the changing dynamics of global finance.<\/p>\n

Why Central Banks Buy Gold<\/strong><\/p>\n

For centuries, gold served as the backbone of monetary systems, from the classical gold standard in the 19th century to Bretton Woods in the mid-20th. While currencies are no longer pegged to gold, the metal continues to act as the final hedge against uncertainty.<\/p>\n

When central banks hoard gold, they are essentially insuring themselves against crises\u2014whether it is inflation eating away at the value of paper money, the collapse of a major currency, or geopolitical turmoil that makes foreign exchange reserves risky. Unlike dollars, euros, or yen, gold does not depend on another government\u2019s fiscal discipline or political stability. It sits in vaults, tangible and indestructible.<\/p>\n

There is also the matter of trust. Citizens and investors are reassured when their central bank holds significant gold reserves. It signals financial stability, especially for emerging economies where currencies are more vulnerable.<\/p>\n

How Central Banks Buy Gold Has Changed<\/strong><\/p>\n

Decades ago, most gold transactions between governments were settled discreetly through official channels\u2014swapping bullion in London or transferring bars at the Federal Reserve Bank of New York\u2019s vaults. The market was tightly controlled, with only a few central banks acting as sellers or buyers.<\/p>\n

Today, the system is more open and market-driven. Central banks typically buy gold through:<\/p>\n

Spot markets and over-the-counter trades:<\/strong> Gold is bought at prevailing international prices, often through bullion banks.<\/p>\n

Domestic production:<\/strong> Countries like Russia and China source directly from local miners, reducing dependence on international suppliers.<\/p>\n

Swaps and leasing:<\/strong> Central banks sometimes lend out part of their reserves to earn interest or use swaps to balance foreign exchange positions.<\/p>\n

The big shift has been in direction. For much of the late 20th century, central banks\u2014particularly in Europe\u2014were net sellers of gold. They preferred holding dollars or bonds that earned steady interest. But since the 2008 global financial crisis, the trend reversed dramatically. Now, central banks are among the largest net buyers of gold, led by the US (8,133 tonnes), Germany (3,351 tonnes), Italy (2,451 tonnes), France (2,437 tonnes) China (2,279 tonnes), Switzerland (1,039.94 tonnes) and India (876 tonnes), as per the World Gold Council.<\/p>\n

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How The Reserve Bank Of India Buys Gold<\/strong><\/p>\n

India, one of the world\u2019s largest consumers of gold, is also steadily expanding its official reserves. The RBI buys gold through international markets, primarily the Bank of England\u2019s vaults in London, where much of the world\u2019s central bank gold is stored.<\/p>\n

The RBI also repatriates gold to domestic vaults for greater security, as seen in recent years when several tonnes were shifted back to Indian soil. Purchases are made quietly to avoid disrupting prices but often coincide with periods of global financial stress or weakening of the US dollar.<\/p>\n

As of mid-2025, India\u2019s gold reserves stand at over 850 tonnes, making it one of the top 10 official holders in the world. This stockpile is part of the broader foreign exchange reserves, which also include dollars, euros, and other currencies. For India, gold provides a hedge against external shocks like volatile oil prices, dollar fluctuations, or sudden capital outflows.<\/p>\n

Why Are Gold Prices Rising In India?<\/strong><\/p>\n

Indian households already see gold as a family investment, a marriage necessity, and a financial safety net. But lately, prices have been climbing at record speed.<\/p>\n

In the last three months alone, domestic gold rates have risen from around Rs 88,000 per 10 grams to over Rs 1,05,000, driven by two main factors:<\/p>\n