The value of gold has been soaring.
It just topped $5,000 an ounce for the first time ever — almost twice what it was just one year ago. And as it rockets skyward, it’s started to displace U.S.-dollar-dominated assets in the holdings of central banks around the world.
Gold now slightly outvalues U.S. Treasury bonds in those holdings, Reuters reported.
And IMF data shows that U.S. dollar assets now account for less than half of those holdings, while gold has risen sharply to make up around 28%.
Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute, said gold has been edging ever higher partly because of investor stress.
“There’s just a very high level of angst about all the things that are going on in the world,” he said.
Samana referred to tariffs and trade wars, geopolitical tensions in oil-producing regions, and rising government debt.
“A lot of investors are looking for a port in the storm, an investment that’s outside financial assets, which tend to be things like stocks and bonds,” Samana said. “Gold is one of the things they see as being money-good.”
Foreign central banks have been buying up gold, too. That’s partly a defensive move — a hostile government can slap on sanctions, but it can’t seize gold out of another country’s vaults.
The trend took off after Russia invaded Ukraine in 2022.
The rise of gold in central bank holdings doesn’t necessarily mean they’re selling off U.S. dollars and Treasuries, said Jennifer Lee, managing director at BMO Capital Markets.
“I don’t think it’s ‘sell America,’” she said. “That’s a bit strong, but just maybe diversifying away a little bit from American assets and going into other areas, like the Euro, like the yen.”
Jay Hatfield, CEO of Infrastructure Capital Advisors, said another factor at play is momentum in the markets.
“Not just gold, but silver, copper, other metals like lithium, are in a momentum rally,” he said. “It just becomes every investor in the world saying: ‘Oh, that’s going up, I’ll buy some.’”
The problem with momentum rallies is that it’s really hard to predict when they’ll peter out, Hatfield said.