Why Are Central Banks Holding Gold? - Brookings Institution

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As the price of gold has risen by about 60% over the past year and surpassed 5,000 dollars per ounce, marking an all-time high, interest is growing in the role of central bank gold purchases amid geopolitical uncertainty and political turmoil in the United States.

On February 2, the Brookings Institution, a U.S. think tank, highlighted the role of gold in central banks' foreign exchange reserves in a report titled "How important are central bank holdings of gold?".

Gold played an important role in the international monetary system during the Bretton Woods era from 1945 to 1970, but its status weakened significantly after the collapse in 1971 of the fixed exchange rate system centered on the U.S. dollar. Between 1971 and 2000, central bank gold holdings declined by about 10% in volume terms, while the share of gold in foreign exchange reserves increased fivefold in real terms. Over the past 25 years, the value of central bank gold holdings as a share of global GDP has risen, reaching 2.5% at the end of 2024.

Gold accounts for about 17% of global foreign exchange reserves. According to data from the International Monetary Fund (IMF), gold held by central banks and the IMF amounts to about 40,000 tons, equivalent to roughly 20% of global gold stocks as compiled by the World Gold Council.

Recent gold purchases have been made almost entirely by emerging markets and developing economies, largely due to geopolitical concerns. Central banks in advanced economies were net sellers of gold up until the 2008 global financial crisis and have generally kept their gold holdings broadly stable since then.

The euro area countries and the United States are the largest holders in terms of central bank gold reserves, with 903 billion dollars and 682 billion dollars, respectively, as of the end of 2024. Among emerging markets and developing economies, Russia and China are the largest gold holders. However, excluding Japan, major advanced economies tend to have relatively small overall foreign exchange reserves, so the share of gold in their reserves is high. As of the end of last year, the Bank of Korea held 104 tons of gold (4.8 billion dollars, as of the end of 2025), ranking 39th among central banks worldwide.

Central banks in the euro area and the United States have been net sellers of gold since 1970, but they still accounted for about 57% of global gold holdings as of the end of 2024. The increase in the value of their gold holdings is due to the sharp rise in gold prices. The price of gold climbed from about 830 dollars per ounce at the end of 2007 to about 2,560 dollars at the end of 2024, roughly tripling over that period.

In contrast, in emerging markets, large-scale net gold purchases by central banks have been observed since the 2008 global financial crisis, particularly in Russia, China, Turkey, and India. According to the IMF's provisional data for 2025, central bank gold holdings have increased further, and this is almost entirely attributable to emerging markets and developing economies. The most prominent buyers have been Russia, China, India, Turkey, and Poland. Estimates suggest that gold will account for about one-quarter of global foreign exchange reserves by the end of 2025, mainly because of the surge in gold prices.

The World Gold Council estimates that central bank gold purchases in 2025 amounted to 863 tons, a 20% decrease from the previous year's 1,092 tons. The Council's estimate is larger than that of the IMF, which may be because it includes purchases that were not reported to the IMF and purchases by other public entities such as sovereign wealth funds.

According to a central bank survey conducted by the World Gold Council and the Official Monetary and Financial Institutions Forum (OMFIF), gold is preferred because it serves as a store of value, a hedge against inflation and geopolitical risks, and an asset whose value tends to rise in times of crisis. Concerns about financial sanctions imposed by the United States and its allies appear to be linked to the increased share of gold in the foreign exchange reserves of central banks in countries such as Russia and China.

The author of the report, Gian Maria Milesi-Ferretti, is a senior fellow at the Hutchins Center on Fiscal and Monetary Policy. He previously served as Deputy Director of the IMF Research Department from 2014 to 2021, where he oversaw multilateral surveillance work, including the World Economic Outlook, G20 reports, spillover analysis, and economic modeling.

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