Central Banks Drive Gold to Record Highs as Global Reserves Shift from Dollar

Gold prices surged to a record high of $3,800 per ounce in September 2025, driven by a weaker U.S. dollar and heightened expectations of further Federal Reserve rate cuts. The price climb was reinforced by central banks' aggressive gold accumulation, with global purchases reaching over 900 tonnes in 2025 alone. Analysts attribute the rally to a combination of factors, including inflation concerns, geopolitical tensions, and a strategic shift away from dollar-denominated assets. The London Bullion Market Association (LBMA) reported a 10.09% monthly increase in gold prices and a 45.22% annual rise, marking a historic milestone as central banks' gold reserves surpassed U.S. Treasury holdings for the first time since 1996 Gold - Price - Chart - Historical Data - News - TRADING ECONOMICS^[3].

Central banks, particularly in emerging markets, are prioritizing gold as a hedge against geopolitical risks and inflation. Countries like Poland, China, and Turkey have led the charge, with Turkey purchasing gold for 26 consecutive months and China acquiring 36 tonnes in the first half of 2025. This trend reflects a broader de-dollarization strategy, as nations seek to diversify reserves amid concerns over U.S. fiscal policies and sanctions risks. The Bank of America noted that central banks have been net sellers of U.S. Treasuries since March 2025, with $48 billion in Treasury sales recorded in the first half of the year. Gold's role as a sanctions-proof asset and its inflation-hedging properties are increasingly seen as critical for financial sovereignty Why Central Banks Are Buying Gold: The Shift From Treasuries^[5].

Market forecasts remain split on gold's near-term trajectory. While J.P. Morgan Research projects a year-end price of $3,675 per ounce, with a potential rise to $4,000 by mid-2026, experts highlight the uncertainty surrounding the Fed's policy path. A rate cut in October is now priced in at 90% probability, with a 65% chance of a second cut in December. Brett Elliott of APMEX noted that gold has been trading within a $3,180–$3,440 range since April, awaiting a catalyst to break out. Josh Barone, a wealth manager, suggested a "bull case" of $4,000 by year-end, contingent on Fed easing, dollar weakness, and sustained geopolitical tensions. Conversely, a bear case of $3,200 was cited if inflation cools and the dollar strengthens What's the gold price forecast for fall 2025? - CBS News^[2].

The surge in gold prices has also influenced market dynamics. The U.S. dollar's decline, coupled with fresh tariff threats from President Trump-targeting imported drugs, trucks, and furniture-has heightened uncertainty. Investors are closely monitoring upcoming data, including the PCE inflation report and nonfarm payrolls, for clues on the Fed's next move. Meanwhile, the Chinese government's continued gold purchases and its decision to offer custody services for foreign holders signal a strategic shift in global reserve management. These actions underscore gold's evolving role as a tool for geopolitical insurance and systemic risk mitigation Gold - Price - Chart - Historical Data - News - TRADING ECONOMICS^[3].

Looking ahead, the structural demand from central banks is expected to sustain gold's upward momentum. J.P. Morgan forecasts annual purchases of over 900 tonnes through 2026, with broader participation from developed markets likely. The World Gold Council highlighted that central bank buying accounts for 25% of annual gold demand, creating a scarcity premium and a price floor absent in previous decades. Analysts caution, however, that elevated valuations and macroeconomic volatility could test market resilience. For now, gold's performance reflects a convergence of institutional confidence, geopolitical pragmatism, and monetary policy uncertainty, positioning it as a cornerstone of global reserve strategy Why Central Banks Are Buying Gold: The Shift From Treasuries^[5].