Gold Above $4,000: Why Central Banks Are Increasing Their Reserves Despite High Prices

Central banks are playing a key role in the current gold rally, actively increasing their reserves of this “safe-haven” asset. Their main goal is to diversify their currency holdings and protect against risks associated with fiat currencies and geopolitical instability. For example, the National Bank of Poland has purchased over 60 tons of gold within a single year. Similar significant purchases have been observed from central banks in Azerbaijan, Kazakhstan, China, and Turkey. These institutions have vast financial resources and are less sensitive to short-term market fluctuations, which means they continue buying even at high prices. This institutional support exerts significant pressure on the market and is seen as a stable, long-term factor driving the metal’s price higher.

According to an ING research note, gold still has potential for further gains. The bank notes that gold has reached a historic peak of $4,000 per ounce and continues to rise, while the People’s Bank of China has extended its series of monthly purchases for the 11th consecutive month despite record-high prices. Additional pressure on the markets comes from the ongoing trade war led by President Trump and heightened geopolitical risks. All these factors suggest that gold prices have the potential to continue increasing, ING points out.

The trend began after the freezing of Russian foreign currency reserves in 2022, when central banks turned to gold as an asset that could not be sanctioned or confiscated. This strategy was further reinforced by growing distrust in fiat currencies and concerns about inflation and fiscal instability in developed economies.

Today, gold is increasingly viewed by central banks as the new “safe haven” — a role that was previously reserved for the dollar. As confidence in fiat currencies weakens, demand for gold from institutional buyers is likely to remain strong.