More gleam for gold in the Global Market Portfolio
Gold hit a record $3,500 in April 2025, fueled by macro risks, de-dollarization, and surging central bank demand. Its GMP share rose to 4.5%, making it a key diversifier and safe-haven asset amid global uncertainty and shifting reserve strategies.
Since Q1 2024, gold has appreciated significantly, with its nominal price achieving an all-time high of USD 3,500 on 22 April 2025, and inflation-adjusted prices surpassing the peak seen during the second oil shock of 1979. This rally in gold has been driven by persistent macroeconomic uncertainties, heightened geopolitical risks, and de-dollarization trends.
From a GMP perspective, this has led to a visible rise of gold’s weight to 4.5% of the total GMP in Q1 2025, from just 1.2% when we started to collect the data in 2000 (Figure 1). Importantly, the current weight surpasses the levels observed in 2011–12, a period when central banks were extensively involved in quantitative easing and asset purchase programs in response to the global financial crisis and the onset of the eurozone crisis.
Gold’s safe haven status was reinforced in 2025
In H1 2025, gold’s reputation as a safe haven strengthened, while that of traditionally defensive assets like long-term US Treasury bonds suffered amid deficit worries and prolonged tight monetary policy amid persistent inflation.
Gold reserves held by central banks have reached levels reminiscent of the Bretton Woods era. This accumulation, reinforced by the recent price appreciation, made gold the second-largest global reserve asset in 2024, after the US dollar. This trend is not expected to stop.
Emerging market central banks have driven gold demand to historic levels
Central bank demand for gold remained very high in 2024, representing 23.6% of global demand—significantly up from the average of 11% in the 2010s.
Central bank gold accumulation stems from geopolitical tensions, beginning with US sanctions on Russia after its 2014 annexation of Crimea (Figure 2). Russia responded by buying gold, but a notable increase in global central bank gold purchases only became apparent in 2022, when Russia lost access to its securities and other central banks followed suit.
However, this central bank story comes mainly from emerging markes. After 2022, increased global demand—especially from China, influenced by Russia’s experience with foreign reserves—has led many EM central banks to diversify their reserves with gold, due to rising geopolitical risks and US Treasury uncertainty. In contrast, developed market central banks have maintained their large gold holdings, unchanged from the gold standard era (Figures 3 and 4).
Concerns regarding fiscal sustainability are likely to persist, which may support real assets such as gold. Given the limited efforts by the US and other countries to consolidate their public finances, these concerns are likely to intensify, thereby benefiting gold due to its role as a store of value asset and potential inflation hedge.
Gold ETP inflows have surged on haven demand
Inflows into gold ETPs have significantly accelerated, with total inflows reaching 322 tons as of end-May 2025, representing approximately 10% of total global holdings (Figure 5). This increase has been primarily driven by a 10% rise in US holdings and a 73% surge in Chinese ETF holdings.
Historically, ETF holdings have been influenced mainly by changes in interest rates, as lower rates have enhanced the appeal of non-yielding gold as a risk-free asset. We anticipate that gold’s haven and hedging benefits will continue to drive additional ETF demand beyond the traditional influence of falling real yields.
Gold continues to act as a diversifier in the GMP
As illustrated by Figures 10-12, gold provides notable diversification benefits within the GMP due to its low correlation with other asset classes. As of March 31, 2025, gold represented approximately 4.5% of the portfolio and contributed over 20% to the total diversification benefits, (which amounted to 2.41% for the full portfolio). Gold’s diversification benefit ranked second to government bonds (Figure 6).
Key points on gold
- Gold has reasserted its strategic importance in the GMP, reflecting a confluence of macroeconomic, geopolitical, and structural shifts.
- Increased demand from central banks—especially those in emerging markets—combined with rising ETP inflows and growing concerns over fiscal sustainability, have enhanced gold’s status from a traditional hedge to a central component of portfolio management.
- With its share in the GMP rising from 1.2% in 2000 to 4.5% in Q1 2025, gold now contributes disproportionately to GMP’s diversification benefits.
As uncertainties persist, gold’s gleam in the global investment landscape appears far from fading.