Is the Gold Boom Over? Central Banks' Gold Demand Shows Signs of Cooling

Gold's meteoric rise over the last few years has left investors, policymakers, and the curious public wondering—what’s fueling this relentless rally, and is it finally running out of steam? The heart of the gold boom lies in central bank buying, and recent data offers some narrative-shifting insights.

Central Banks: Powering the Gold Rush

If you analyze gold’s surging demand since 2022, the numbers are staggering. According to the World Gold Council (WGC):

• 2022: Central banks purchased 1,082 tonnes of gold.

• 2023: Purchases remained robust at 1,037 tonnes.

• 2024: A record-setting year with 1,180 tonnes acquired.

For context, the combined purchases in 2020 and 2021 were under 1,000 tonnes, signaling that central banking demand in the last three years has shifted into overdrive.

The Price Surge: Cause or Effect?

This persistent appetite for gold drove prices sharply higher—from $1,730 in July 2022 to a staggering $3,330 by July 2025. That’s a 90% gain in just three years.

Why does this matter? Because gold now commands a 20% share of global central bank foreign exchange reserves, leapfrogging the euro (16%), though still behind the dollar (46%).

Is Central Bank Demand Cooling Off?

The trend for 2025 marks a potential change in momentum:

• Q1 2025: 244 tonnes purchased

• Q2 2025: Drops further to 166 tonnes

Major buyers like the National Bank of Poland remain active, alongside Azerbaijan, Turkey, Kazakhstan, and China. But the broader picture is of decelerating purchases. Leading consultancy Metals Focus predicts 2025 could end with central banks buying about 8% less gold—close to 1,000 tonnes. Some analysts even think the figure might drop below that threshold.

Are Central Banks Still Interested in Gold?

Uncertainty lingers. The WGC Central Bank Gold Reserves Survey 2025 found 43% of central bankers plan to increase reserves over the next year. Behind the scenes, however, many central banks may be underreporting purchases, with up to two-thirds allegedly done in secrecy.

Headwinds for Gold

Several factors are challenging gold’s dominance:

• Gold prices in India: ₹98,350 (as of August 2025), with little movement over two months.

• Stronger US Dollar: Up 3% in a month after an earlier 10% drop.

• Geopolitical stabilizations: Waning of the “fear factor” that previously turbocharged gold buying.

• US fiscal uncertainty persists: Moody’s cutting the US credit rating to Aa1 remains a support for gold.

Should these tailwinds disappear—a resolution of geopolitical risks, renewed global growth—the gold market could face a sharp 10%-15% correction.

The Bigger Picture

Central banks now hold a collective 36,305 tonnes of gold as of April 2025, an astonishing cache of reserves. Investor chatter on social media speculates: Do the world’s central banks “know something” about the future of the dollar and global economy that we don’t?

However, the recent cooling in central bank buying might signal brighter prospects for the global economy—and potentially tougher times ahead for gold’s relentless ascent.

 

Until the world moves toward peace and growth-driven recovery, uncertainty will keep demand for gold high. But, if the tide turns, expect gold’s rally to pause, or even reverse.

Want to track the next move in gold? Keep an eye on central banks—they’re the stealthy giant hands shaping the gold market’s future