Source: Goldman Sachs Research
G7 countries responded to the invasion of Ukraine by freezing more than $280 billion of Russian assets. Those holdings were primarily euro securities, but also US dollar and other denominations. Most of those foreign assets were held in Brussels.
The freezing of Russian assets in Brussels showed that foreign reserves could potentially be confiscated. As a result, governments have been buying much more gold.
Central banks hold more than $12 trillion in foreign exchange reserves. They keep these assets for a number of reasons, such as diversification, to protect against inflation, and to defend their own currency if it comes under stress (by selling foreign reserves to buy the domestic currency). Foreign reserves are often denominated in the US dollar but also other currencies like the euro.
The $12 trillion of central bank reserves
Since the freezing of Russian assets in Europe, central banks have been buying much more gold. They can keep the metal in their own vaults on their own territory, out of reach of other institutions and governments around the world.
Since 2022, central bank purchases of gold on the London over-the-counter market have increased fivefold, according to Goldman Sachs Research.
Source: IMF
Source: Goldman Sachs Research
Gold tends to rise when there’s macro uncertainty
A snapshot of how hedge funds and other traders are positioned shows that gold trading spikes during periods of geopolitical turmoil. Gold has risen in 2025 amid uncertainty over the Trump administration’s tariffs on major trading partners.
Source: CFTC, Goldman Sachs Research
Central banks in emerging markets are playing catch up
Emerging market central banks, which have a smaller percentage of their reserves in gold, are also playing catch up with their peers in developed markets, according to Goldman Sachs Research. China holds less than 10% of its reserves in gold, compared to about 70% or more for the US, Germany, France, and Italy.
Developed economies’ large gold holdings are partly a legacy of the gold standard era, when sovereign money supplies were linked to gold.
Source: World Gold Council, IFS. As of first quarter 2025.
Interest rates still matter for gold prices
Interest rates have typically been one of the most important dynamics in gold prices. Because the metal doesn’t offer a yield like bonds, it’s more attractive to investors when interest rates are lower (and vice versa when bond yields are higher).
Source: Bloomberg, Goldman Sachs Research
While central bank purchases have been the primary factor driving up gold prices in recent years, growing exchange-traded fund (ETF) holdings of gold are also beginning to feed into the mix.
ETFs linked to gold have about $294 billion of assets under management, representing about 3,000 tonnes of the material. The likes of pensions and individual retail investors tend to hold the bulk of investments in gold ETFs. ETF holdings typically track interest rates closely.
For this reason, gold prices have historically been correlated with interest rates. More recently, central bank buying has caused the two to diverge, but Thomas says the influence of interest rates hasn’t disappeared entirely. While ETF holdings tend to track interest rates closely, they often overshoot significantly when recession fears grow.
Source: Goldman Sachs Research, Federal Reserve Board. As of March 25, 2025.
Investor and central bank purchases are setting the gold price
Source: Bloomberg. As of May 2, 2025.
Gold remains a volatile commodity. A range of catalysts, from changes in US Federal Reserve policy to tariff expectations, could cause the metal’s price to gyrate in the coming months.
"We are seeing a steep ramp-up in ETF holdings, beyond the level that an interest rate model would imply, as investors worry about a potential recession."
ETF holders: the reason there's a correlation between rates and gold
Lina Thomas
Goldman Sachs Research
GLOBAL FOREIGN EXCHANGE RESERVE BY CURRENCY: Q3 2024 (TRIILLIONS)
Monthly central bank and other institutional demand on London OTC market
CENTRAL BANK & OTHER INSTITUTIONAL GOLD PURCHASES ON LONDON OTC (MONTHLY AVG)
GOLD NET LONG MANAGED MONEY ON COMEX
“Whenever there’s a lot of uncertainty, traders temporarily park their money in gold. When there’s clarity, gold prices tend to drop again because traders know what to do with their money.”
Lina Thomas
Goldman Sachs Research
Russia's war in Ukraine marked a turning point for gold
CENTRAL BANK GOLD RESERVES AS A PERCENTAGE OF TOTAL HOLDINGS
“The global average is roughly 20%, which we view as a plausible medium-term target for large emerging-market central banks"
Lina Thomas
Goldman Sachs Research
US POLICY RATES AND ETF HOLDINGS
Central banks have been buying much more gold
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Gold is still a haven asset
GOLD PRICE PER TROY OUNCE
Some investors were puzzled by the 5% drop in gold prices, a decline in tandem with stocks, after the US announced its country-level “reciprocal” tariffs. Ordinarily, gold is seen as a haven, strengthening at times of volatility and when equities sink.
Thomas explains that gold’s status as a haven asset hadn’t disappeared. Instead, the steep decline in stocks led investors to sell liquid assets like gold to raise cash for collateral against their equity market positions.
Source: Bloomberg
“If you tilt your head a little bit, you can sort of see that the interest rate relationship is still there.”
Lina Thomas
Goldman Sachs Research
GOLD PRICES AND INTEREST RATES
“The long-run bull story for gold is that central banks are buying large amounts of it. We expect that to continue for at least another three years.”
Lina Thomas
Goldman Sachs Research
“What we saw since 2022 is this impressive rise, this huge surge,” Thomas says of central bank purchases of gold.
"Central banks are structurally raising the floor under prices by steadily reducing the amount of gold available for trading in the market. As a result, even during corrections, the new lows are higher than where prices were just a few weeks earlier."
Lina Thomas
Goldman Sachs Research
GOLD PRICE PER TROY OUNCE (QUARTERLY)
“We have seen this before in 2008, 2020, and even in August 2024. Times like these are good buying opportunities, because gold typically rebounds shortly afterwards as investors seek safe assets. The same thing played out in April.”
Lina Thomas
Goldman Sachs Research
A snapshot of how hedge funds and other traders are positioned shows that gold trading spikes during periods of geopolitical turmoil. Gold has risen in 2025 amid uncertainty over the Trump administration’s tariffs on major trading partners.
Source: CFTC, Goldman Sachs Research
“Whenever there’s a lot of uncertainty, traders temporarily park their money in gold. When there’s clarity, gold prices tend to drop again because traders know what to do with their money.”
Lina Thomas
Goldman Sachs Research
Gold tends to rise when there’s uncertainty — such as tariffs
GOLD NET LONG MANAGED MONEY ON COMEX
Source: Bloomberg. As of May 2, 2025.