Central banks in a gold rush: Global reserves have risen rapidly since the financial crisis – despite recent record-high prices

If a good becomes rapidly more expensive in a short period of time, it would actually be a good moment to ask: Do I really need this?

When it comes to gold, many investors seem to be coming to the conclusion: Yes, I need it. The new Gold Demand Report, released by the World Gold Council on Wednesday, shows unbroken growth in demand for gold – even though the price of the precious metal has reached a new record high amid geopolitical uncertainty and the tariff war.

Central banks also like gold. In the first three months of the year, global central bank gold reserves grew by 244 tons, continuing a trend that has been ongoing for over a decade.

Since the financial crisis of 2008 and 2009, central banks worldwide have collectively bought more gold each year than they sold during the same period. Central banks in developing countries, in particular, have continuously expanded their gold reserves.

According to John Reade, senior market strategist at the World Gold Council, the growth of gold reserves has actually accelerated after 2022. There are two main reasons for this: "By holding more gold, central banks are hedging against inflation. And they are reducing their dependence on the dollar."

The dollar is by far the world's most important reserve currency. According to figures from the International Monetary Fund, almost 60 percent of foreign exchange reserves are held in dollars. Investors have high confidence in the American economy and its bond market—at least so far.

Adriel Jost is an economist and fellow at the Swiss Economic Policy Institute (IWP). He sees the shift of central bank reserves into gold as a clear vote of no confidence in the dollar. At least since the G7 countries froze Russia's foreign currency reserves after the outbreak of war, central banks have become more cautious: "They now know that their central banks' reserves can be used as geopolitical leverage."

Jost says the dollar has held up well for a long time. But it's clear that the US has overstepped its bounds: "They have accumulated massive debt for decades and, at the same time, created a threatening atmosphere with their status as the issuer of the global reserve currency. No wonder this will eventually take its toll in a loss of confidence."

In recent weeks , yields on US Treasury bonds have risen , and the dollar has depreciated. Both are signs that investors have become more skeptical about the US economic outlook. Jost believes this development is irreversible: "There is no clear alternative. But the signs that the dollar is gradually losing importance are obvious."

Jost is not alone in this opinion. Recently , Larry Fink, founder and CEO of the world's largest asset manager, Blackrock, warned that high levels of debt in the US were undermining confidence in the dollar. And economic historian Barry Eichengreen said in an interview with the NZZ that the Trump administration's economic policies had raised "significant doubts about the global role of the dollar."

But not all central banks are attracted to gold. Western central banks, in particular, are largely maintaining their reserve policy.

The Swiss National Bank (SNB), for example, holds 1,040 tons of gold, and has barely deviated from this level since the financial crisis. However, compared to foreign currency reserves, gold holdings have declined in importance: last year they accounted for 10 percent of the value of the reserves. While this is higher than in previous years, because the holdings have increased in value due to the high price of gold, gold's share of the SNB's total reserves was already much higher: in 2007, before the outbreak of the financial crisis and the subsequent expansion of the balance sheet through the purchase of foreign currencies, it was still 40 percent.

Adriel Jost believes the declining weight of gold is a mistake. He says the SNB should buy more gold again instead of foreign government bonds: "The SNB would have to accept the associated signal to other countries that they cannot continue to accumulate debt."

SNB Chairman Martin Schlegel and Federal Council President Karin Keller-Sutter, who recently sought to establish good relations with the Trump administration, would not make any friends in Washington with this attitude.