Gold prices edged higher after the United States launched missile strikes on Iran, becoming directly involved in the escalating conflict between Iran and Israel. As the situation remains volatile and analysts predict increased geopolitical risk, demand for safe-haven assets remains elevated.
This geopolitical tension is amplifying a broader, long-term shift in global gold demand, especially among central banks. A recent World Gold Council survey found that nearly half of central banks in the developing world plan to increase their gold reserves within the next year, a trend driven largely by de-dollarization strategies and skepticism toward the U.S. dollar’s safe-haven status. In 2024 alone, central banks purchased over 1,000 metric tons of gold for the third consecutive year, marking a sustained departure from decades of declining official gold holdings following the end of the Bretton Woods system.
Much of this momentum comes from emerging market economies such as China, India, and Turkey, which are scaling back exposure to the U.S. dollar and U.S. dollar-denominated assets amid fears of sanctions and concerns over U.S. fiscal stability. Gold has now surpassed the euro as the second-largest reserve asset globally. Gold’s lack of counterparty risk and resilience against political manipulation are proving increasingly attractive to central banks seeking a reliable hedge.
Many such as James Steel, chief precious metals analyst at HSBC, view this “grand portfolio shift” as a pragmatic response to rising debt levels and growing global instability. With the dollar under pressure from trade protectionism, high deficits, and political unpredictability, gold is regaining a central role in the global financial system. As Luca Paolini, chief strategist at Pictet Asset Management puts it, “Gold is the ultimate confusion trade”—a metal whose luster shines brightest when the world is at its most uncertain.
