Gold holds firm as central banks and investors look beyond price

Central banks remain the structural anchor

Central bank buying has remained a major pillar of demand since 2022, when Russia’s invasion of Ukraine and the subsequent Western sanctions, including the freezing of assets held by the Central Bank of Russia, fundamentally changed how reserve managers think about sovereign assets and reserve security.

That triggered a wave of official sector buying, with central banks purchasing more than 1,000 tonnes annually in each of the following three years, before demand eased modestly last year to around 850 tonnes, still historically strong. So far this year, buying remains robust, with the World Gold Council reporting net purchases of 243.7 tonnes in the first quarter, slightly above Q1 last year.

The drivers remain clear:

Reducing dependence on the U.S. dollar
Reserve managers are increasingly wary of overexposure to dollar-denominated assets, particularly at a time of rising U.S. fiscal deficits, expanding debt burdens and concerns over the long-term purchasing power of fiat currencies.

Sanctions risk and reserve sovereignty
The freezing of Russian reserves was a watershed moment. Gold held domestically carries no counterparty risk and remains beyond the reach of foreign sanctions or financial restrictions.

Portfolio diversification
Gold offers low correlation to traditional reserve assets such as sovereign bonds, while maintaining liquidity and long-term store-of-value credentials.

Inflation and debt concerns
Persistent deficits, rising debt-to-GDP ratios and repeated fiscal stimulus measures are fuelling concern about long-term currency debasement.

Geopolitical fragmentation
As the global economy becomes increasingly divided into competing blocs, gold remains one of the few reserve assets that is universally accepted, politically neutral and controlled by no single government. In short, central bank buying is not about chasing price, but about reducing strategic vulnerability.

Investors are increasingly thinking the same way

What is increasingly notable is that investors, both private and institutional are arriving at much the same conclusion. Investment demand remains robust because many of the same macro concerns influencing central banks are also shaping portfolio decisions across pension funds, family offices, wealth managers and retail investors.

Similar drivers to central bank demand with a few additions:

Hard asset protection against fiscal risk
Investors increasingly view gold as a hedge against unsustainable debt accumulation, policy uncertainty and the gradual erosion of fiat purchasing power.

Inflation resilience
Even where headline inflation moderates, structural inflation concerns tied to energy transition spending, supply chain fragmentation, defence spending and labour shortages continue to support demand for inflation hedges.

Momentum and FOMO
Gold’s strong price performance has become a driver in itself. Momentum-following investors and underallocated portfolios are increasingly being drawn into the market by fear of missing further upside.

TINA—There is no obvious safe alternative
Equities remain strong, but valuations are stretched. Bonds offer income, but not always reliable diversification in an inflationary environment. Cash remains vulnerable to real purchasing power erosion. Gold increasingly sits in the middle as a liquid hard asset hedge.

Short-term outlook: rangebound, but resilient

From a technical perspective, gold remains in consolidation mode after its recent correction. Support has in the last two weeks been established ahead of USD 4,500, while initial resistance is seen at the 50-day moving average near USD 4,780, followed by stronger resistance around USD 4,850.

Following the January to March 1,500-dollar slump gold has since held firm during a period of exceptional equity market strength, something that under normal circumstances might have triggered deeper profit-taking. Instead, continued central bank demand, lingering investor unease over inflation, slowing growth and mounting fiscal debt concerns have kept dips relatively shallow.

For now, gold appears to be catching its breath rather than losing its footing, and importantly, the buyers that increasingly matter are looking beyond price.