Gold has always carried many identities. Most recently it has been seen as a hedge against a debasement of the US dollar and the decline of US hegemony, and for some, a pure speculative asset.
A confluence of factors currently acting in gold’s favour have pushed its price into the territory of speculators. Performance has been exceptional (depending on one’s starting point). The potential of protracted future underperformance of course remains, in many ways just like any other asset. Gold is, however a remarkable metal. The World Gold Council estimates that the total above-ground gold (216k tonnes) can fit into a cube measuring just 22m on each side. With remaining mineable reserves being far lower, the supply-side story for gold is strongly intact.
Central banks playing a central role
A key part in what is likely to result in a sustained desire for gold is the move to a multi-polar world. This broader theme of the waning influence of the US dollar, is not new. Indeed, it gave rise to the advent of cryptocurrencies, and for even longer many of those in emerging markets have long favoured its insurance not only against inflation and weak currencies but also against politics.
Most recently, Tether has emerged as a major source of demand for gold. Tether’s gold and bitcoin reserves stand at $12.9 billion and $9.9 billion, respectively, representing about 13% of their total reserves.
Central banks are significant players and currently hold almost 20% of all mined gold. They (with a particular focus on those in emerging markets) are not only buying gold but they are also more intentional about where they store the gold. Perhaps not dissimilar from citizens’ lack of trust in their own government, but each government having reduced trust in the global hegemony. Moscow, for example, had already been shifting its National Welfare Fund into gold since 2014 and after 2022, that logic hardened. The remarkable discussions around the EUR193 billion of frozen Russian assets held by Brussel’s Euroclear are also a stark reminder of the geopolitical complexity in a multi-polar world.
Globally, central banks now hold approximately the same value of gold as they do US treasuries (this has not been the case since before 2000). Part of the “gold is overtaking US Treasuries” story comes down to valuation. Treasuries have been under pressure from rising issuance, widening deficits, and reluctant buyers. The shift signaling the growing anxiety around US deficits.
Real yields
In theory, higher real yields should suppress gold prices. Why pay to hold a metal that earns no yield, when you can earn an inflation-beating return elsewhere? Yet in the opposite has occurred recently – bullion has risen despite real yields.
Jewellery: Still the Heavyweight
Jewellery remains the largest single source of gold demand (approximately half of all mined gold is in the form of jewellery). Purchases surged between 2001 and 2013, driven by liberalisation and rising incomes in Asia. Since then, demand has fallen by almost half, held back by slower growth, shifting demographics and higher prices.
China continues to stand out. Households spent RMB 84bn ($11.5bn) on jewellery in the first quarter of 2025, the third-highest quarter on record. Even at elevated prices, consumers appear to treat gold jewellery less as a luxury and more as a way to preserve value.
The question now is what comes next
Gold has a uniqueness to it, an appeal with permanence. The investment case is interesting, with clear and meaningful support from central banks and individuals worldwide. The challenge however, as with all investments, is assessing a fair price and with the recent surge in gold price being more speculative than fundamental, this is challenging. Fundamentals are strong but the speculation is where the risk lies and this is impossible to predict.
For developed markets, gold will remain a hedge. For emerging markets, a lifeline. For investors, a diversification tool in a world where old correlations may no longer hold.
The price will swing with familiar forces: interest rates, the US dollar and geopolitics. If they align, bullion could glitter even brighter. Either way, this precious metal is back at the centre of the story.