Gold price has surged since Liberation Day, briefly touching $5,300 per ounce before the Iran War triggered a sharp reversal. Beneath the price volatility lies a deeper structural shift: central banks — led by emerging markets — have been accumulating gold at historically elevated rates for over a decade and even Western allies are quietly reconsidering where they store their gold.
Liberation Day and the broader foreign policy shifts of the second Trump administration have weighed heavily on global supply chains and financial markets, as examined in our previous two Geoeconomic Dynamics Update releases, which focused respectively on global export markets and the supply-chain effects of disruption in the Strait of Hormuz. This third release turns to financial markets, with a particular focus on gold. We examine how gold has responded to major shocks, how reserve holdings have changed, and what recent developments — including France’s decision to swap part of its gold reserves held in the United States — may signal about broader trends. We also address more fundamental questions: who is buying gold, and how patterns of demand have changed over time.
Since Liberation Day, gold prices have risen as markets are uncertain about the direction of geopolitical developments. Gold has re-emerged as a safe-haven asset, especially as investors weigh the risk that political and military conflict could generate broader disruption in global markets, including the possibility of war in the Western Hemisphere and the prolonged impact of retaliatory tariffs on global trade and supply chains. Trade and financial instability stemming from the White House has eroded confidence in Treasury bonds, while bringing a weakening dollar which has shifted towards gold demand. Prices rose from an initial level of around $3,100 per troy ounce to a peak of $5,379 in late January 2026, before falling temporarily and then rebounding after the outbreak of the 2026 war in the Strait of Hormuz. It is now hovering at $4,600 per troy ounce, representing a roughly 53 percent jump.
Looking more closely at gold prices since the Iran War began, prices initially rose in the immediate aftermath of the outbreak but then fell sharply by nearly 20 percent by late March. Gold rebounded in mid-April following the ceasefire on April 7, but prices have remained volatile amid continuing uncertainty over the Strait and the broader regional outlook. While analysts frequently tout gold’s ‘safe-haven’ status during uncertainty, we see clearly some diverging patterns. Countries will often sell off some gold reserves to raise liquidity to manage economic pressure. Türkiye, for example, sold its gold reserves by 131 tonnes in March 2026 in an effort to stabilize the Lira.
Although many investors expected gold to continue rising during periods of instability, this pattern is not unusual. Gold has often reacted to conflict with an initial surge, only to retreat once markets begin reassessing the duration of the crisis, the monetary environment, and the broader economic outlook. Following the 1979 Soviet invasion of Afghanistan and the Iran hostage crisis, gold appreciated by nearly 50 percent within a month, only to revert to pre-conflict valuations in subsequent years. Similarly, the gold market jumped during the initial 9/11 attacks, but quickly returned to pre-conflict prices, indicating that conflicts does not guarantee a bullish gold market. Gold has also performed shakily during financial shocks. During the collapse of Bear Stearns in March 2008, gold prices rose from $922 to $968 per ounce. However, following the Lehman Brothers bankruptcy in September 2008, prices plummeted to $760 per ounce. This drop was driven by a flight to liquidity, as institutional investors and firms liquidated their positions to secure US dollars. These empirical patterns challenge the conventional safe-haven narrative. Gold functions effectively as a hedge against generalized uncertainty and depreciating USD. However, it proves ineffective during acute dollar liquidity crises.
For the past two decades, gold demand remained relatively predictable. As of late, central bank and institutional investor demand has jumped.
The most significant change is the rise of central bank gold purchases. From 2022 to 2024, central bank net purchases of gold exceeded 1,000 tonnes — more than double the average of the previous decade. Remarkably, this demand was sustained despite gold prices reaching historic highs during this period.
This is a significant shift when understanding that in 2010 central bank demand accounted for approximately 2 percent of total gold demand, and that annual purchases averaged 543 tonnes over the 2011 – 2019 period. By 2025, that figure had climbed to 17 percent. While 2025 witnessed a moderate cooling of demand to 863 tonnes — as banks recalibrated their pace in response to record price ceilings and the fulfilment of target reserve levels — overall accumulation remains historically elevated. This sustained demand suggests a fundamental realignment in reserve management strategies.
Since 2000, the US dollar’s share of global foreign exchange reserves has fallen by roughly 20 percentage points, from 61.4 percent to 42.0 percent. Other currencies — the Canadian dollar, Australian dollar, and Chinese renminbi — have each picked up small shares, with none exceeding 2 percent of global reserves. Gold’s share has risen most dramatically — from 15 percent in 2023 to 26 percent in 2026 — though this partly reflects record gold prices rather than purely active accumulation.
Crucially, the dollar’s decline is most evident when accounting for gold. While the USD still maintains a 58% share of traditional foreign exchange reserves (excluding gold), its share of total global reserves (including gold) has dropped to 42% — well below its historical average. This suggests that while central banks increasingly utilize gold as a hedge against instability, they continue to hold dollars in part due to the absence of a viable alternative.
Part of this rise reflects valuation changes — gold prices have surged, mechanically inflating gold’s share of reserves. But volume data confirms the trend is real: central banks have been net buyers of gold since 2010. Specifically, divergence between advanced economies and emerging markets is striking. Advanced economy central banks have held their gold volumes broadly flat. The striking purchase pace since the Global Financial Crisis (GFC) has come almost entirely from EMDEs, whose total gold volume has grown by 162 percent since 2000. Section 4 examines this cohort and the geopolitical logic driving it.
Since 2000, official gold purchases have been concentrated among nations seeking to mitigate their exposure to the US financial system. The 2008 GFC served as a pivotal turning point, highlighting the risks of over-dependence. Notably, Russia and China account for more than half of all net official gold acquisitions globally in this period, with each adding over 1,900 tonnes to their reserves as of February 2026. Furthermore, four of the top ten purchasers since the turn of the century are BRICS+ members.
A defining characteristic of contemporary gold demand is its increasingly geopolitical underpinnings. The 2022 decision by G7 nations to freeze $300 billion in Russian foreign exchange reserves served as a pivotal catalyst, prompting other central banks to accelerate gold purchasing as a defensive measure against potential Western sanctions.
Türkiye, which has faced successive rounds of US and EU sanctions, more than quintupled its gold holdings since 2000 — from 116 tonnes to 800 tonnes. Hungary, similarly, exposed to political friction with the EU, grew its holdings from just 3.1 tonnes to 110 tonnes over the same period.
However, even countries that are traditionally Western-aligned, such as Poland and Czechia have increased their gold reserves. Poland, most notably, has increased its holdings nearly fivefold — from 103 tonnes to 515 tonnes — purchasing around 100 tonnes in 2025 alone. This emphasizes gold’s role as insurance in an increasingly fragmented world, and highly unstable due to conflicts and erosion of the international order.
France’s decision to repatriate its gold marks a telling shift in how Western nations think about gold and reserve security. In early April this year, the Banque de France announced that it had completed its repatriation of its last 129 tonnes of gold — around 5 percent of France’s total reserves — from the Federal Reserve in New York. France now holds its entire gold stock in its own vaults for the first time in decades.
France’s decision to swap out its final gold holdings comes as US allies increasingly face calls to repatriate their gold. In Germany, the head of the European Taxpayers Association, Michael Jager, has called to withdraw its gold holdings from the US. Critics argue that political uncertainty has made it increasingly risky to keep national reserves there. Some have even warned that, in a more extreme geopolitical scenario — such as a US move on Greenland — Germany could face difficulty accessing its gold holdings in the United States. Italy also faces similar pressure, holding 43 percent of its reserves in New York. Together, Germany and Italy store an estimated USD 245 billion in gold on American soil — a concertation that has attracted increasing scrutiny as transatlantic relations grow more unpredictable.
Although it remains unclear what share of their reserves other countries still store in the US, moves by the world’s largest gold holders would send an important signal that even close US allies no longer treat American custody of their gold as unconditional.
Gold’s recent behaviour does not fit neatly into the traditional safe haven story. Prices surge when uncertainty is high and trust in the dollar system is eroding — but when a crisis turns acute, investors have repeatedly reached for dollar liquidity first. The Iran War showed that even open conflict does not guarantee a sustained gold rally.
What has changed more clearly is the role gold now plays in global portfolios and reserve management. Central bank buying has remained historically elevated, even as prices hit record highs, with the dollar’s share of global reserves continuing its decline. Investors have also made gold a key part of their portfolios. These are not short-term reactions to individual shocks, but rather a structural reassessment that was underway before Liberation Day and the Iran War accelerated it.
In a world shaped by sanctions risk, geopolitical fragmentation, and weaker trust in the political neutrality of the dollar system, gold offers something that no foreign currency can fully provide: a reserve asset without issuer risk, direct sanctions risk, or dependence on another country’s financial infrastructure. This explains the surge in central bank demand, particularly from EMDEs in the wake of the GFC. Ultimately, gold is solidifying its position as a strategic safe haven asset within an increasingly multipolar world. As the US-led rules-based order recedes, the structural shift toward gold is likely to persist.
For the full report, please refer to the detailed version here.
Director, Asia Global Institute
Research Assistant, Asia Global Institute
Research Assistant, Asia Global Institute
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The University of Hong Kong
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