Central Banks Turn to Gold as Dollar Doubts Deepen

Gold prices surged past $3,500 per ounce in early September 2025, setting a new record and extending a multi-year rally driven by global economic uncertainty, a weakening US dollar, and growing geopolitical risks. The precious metal has nearly doubled in value since the start of 2023 and climbed over 30% this year alone, reflecting heightened demand from both investors and central banks seeking safe-haven assets. Analysts attribute the rally to a shift away from dollar-denominated assets amid concerns over the US Federal Reserve's independence and Trump administration trade policies that have intensified economic volatility.

The surge in gold prices has coincided with a decline in the value of the US dollar and rising bond yields in major economies. UK 30-year government bond yields hit a 27-year high, while similar pressures were observed in France and Germany. At the same time, central banks in India, China, Turkey, and Poland have been increasing their gold reserves, a trend that accelerated this year amid concerns over US debt levels and geopolitical tensions. Gold has emerged as the second-largest reserve asset globally, surpassing US Treasuries in some central bank holdings, according to reports from the European Central Bank.

Investors are now pricing in a 90% probability of a 25-basis-point rate cut by the Federal Reserve at its September meeting, which would further reduce the opportunity cost of holding non-yielding assets like gold. Market analysts such as Mark Haefele from UBS Global Wealth Management and Ipek Ozkardeskaya from Swissquote Bank have highlighted gold’s traditional role as a hedge against uncertainty. Haefele predicted gold could reach $3,700 an ounce by next June, while Ozkardeskaya noted that central banks’ gold allocations may surpass their US treasury holdings this year, signaling a structural shift in reserve management.

Alongside gold, silver has also posted strong gains, reaching a level last seen in 2011. The gold-silver ratio, currently above its long-term average, suggests that silver has untapped upside potential. Analysts like Tim Waterer from KCM Trade and Sandip Raichura from PL Capital have projected further gains for both metals. Raichura pointed to continued bullish momentum for gold through the end of the year, with a price target of $3,700, while Waterer suggested $3,600 could be a near-term threshold if the Fed implements multiple rate cuts and geopolitical tensions persist.

Looking ahead, the upcoming release of US nonfarm payrolls data on September 5 will be closely watched for signals on the magnitude of an expected rate cut. A weaker-than-anticipated labor market report could further accelerate the shift toward gold and other safe-haven assets. Additionally, continued central bank buying, particularly from China, is expected to support prices through the end of the year. The interplay of macroeconomic policy, currency trends, and geopolitical risk continues to underpin gold’s upward trajectory.

Source: [1] Gold price hits record high as investors seek safe haven (https://www.theguardian.com/business/2025/sep/02/gold-price-record-high-bullion-donald-trump) [2] Gold price hits a new record high on a weaker dollar and (https://www.cnn.com/2025/09/02/business/gold-price-record-dollar-interest-rates-intl) [3] Bitcoin vs. Gold - Updated Chart (https://www.longtermtrends.net/bitcoin-vs-gold/) [4] Gold prices surge to record high, analysts now eye (https://www.livemint.com/market/commodities/gold-surges-to-record-high-analysts-now-eye-3-700-target-silver-set-to-rally-to-48-1175****607244.html) [5] Gold hits new high on rising uncertainty, while U.S. stock (https://www.marketwatch.com/story/gold-prices-hit-all-time-high-on-rising-uncertainty-while-u-s-stock-futures-little-changed-2a6eb69b)