Why are central banks still buying gold?

Is central bank gold buying the same thing as rising gold prices?

When geopolitical conflict escalates and gold prices are already high, why are central banks still willing to keep buying gold? ING’s “Why the Gold Rally Isn’t Over Yet,” the World Gold Council’s “Weekly Markets Monitor – Crisis Hedge,” and State Street’s “Monthly Gold Monitor” discuss official reserve demand, gold’s performance during crises, and how energy prices and interest rates can change gold prices. Together, they allow us to separate “why buy” from “what happens after buying.”

When central banks decide how much gold to hold, they consider whether national reserves will remain usable during sanctions, currency volatility, and financial crises. Market gold prices, meanwhile, are also affected by the USD, interest rates, ETF flows, and energy prices. The three reports address the same asset but answer questions at different levels.

ING: Central banks are adjusting the structure of national reserves

ING describes official-sector demand as a pillar of the gold market. The report argues that since 2022, some emerging-market central banks have accelerated reserve diversification to address sanctions risk and geopolitical fragmentation, while reducing their dependence on the USD. Reserve diversification means not concentrating a country’s safety buffer in a single currency or asset. ING therefore concludes that this demand is strategic and usually does not disappear immediately just because gold prices rise in the short term.

Poland provides a concrete example. ING writes that Poland raised its gold-reserve target from about 550 tons to about 700 tons, shifting from maintaining a fixed 30% share to pursuing a higher absolute holding. In ING’s interpretation, this means the purchase target is no longer adjusted automatically with the size of foreign-exchange reserves; instead, gold is being actively added as a reserve instrument.

China illustrates continuity. ING records that, as of January 2026, the People’s Bank of China had increased its gold holdings for 15 consecutive months. However, these two examples only show that Poland and China still had clear gold-buying actions; they cannot, on their own, represent the net demand of all central banks.

World Gold Council: Crises explain why gold attracts attention

The World Gold Council focuses on a different causal chain: how sudden crises activate safe-haven demand. Its report says that after tensions in the Middle East escalated, gold rose by about $200 in less than two trading days, a gain of about 4%. This shows that a crisis can quickly change the asset preferences of investors and institutions, but it does not prove that every central-bank gold purchase is intended to chase that move.

The report also reviews 14 episodes between 1985 and 2026 in which the geopolitical risk index rose sharply. In these samples, gold generated a positive return 64% of the time. In other words, gold rises more often during crises, but the evidence falls far short of showing that it rises whenever conflict occurs.

The World Gold Council’s material is therefore better suited to explaining why gold is viewed as a crisis-hedging tool. ING’s material goes further by explaining why central banks place that tool in their reserves over the long term. The former describes market reactions during crises; the latter describes allocation choices on national balance sheets.

State Street: Conflict can also temporarily weigh on gold prices

State Street provides a counterintuitive boundary. Its report argues that if war pushes up oil prices, it may first raise inflation expectations and real interest rates. Real interest rates can be understood simply as the interest return after inflation; when they rise, holding gold, which pays no interest, becomes more costly. The report records that during the oil-price shock, medium-term real interest rates rose by about 26 basis points, while expectations for roughly 58 basis points of rate cuts before the war were erased.

State Street therefore argues that geopolitical conflict may not directly push gold higher in the short term. If higher oil prices lead the Federal Reserve to maintain tighter policy, gold may come under pressure; if the conflict further damages growth and increases fiscal burdens, gold’s strategic reserve role may strengthen. The same crisis can first suppress gold prices through interest rates, then increase demand for gold through recession, debt, or sanctions risks.

This also explains why “central banks are still buying” cannot be directly translated into “gold prices will rise immediately.” Central-bank purchases may provide slower, more stable demand, while short-term prices can still be pulled in different directions by interest rates, the USD, and energy shocks.

The consensus and boundaries across the three reports

ING expects the Federal Reserve may begin cutting rates in the second quarter and argues that moderate easing can reduce the opportunity cost of holding gold. It also points out that gold ETF holdings remain below their 2020 peak; if expectations of rate cuts strengthen or geopolitical risks intensify, ETF inflows could amplify price movements. These are conditional judgments from ING, not outcomes that have already materialized.

The three materials share the view that geopolitical fragmentation, reserve security, and gold’s role in crises are important background factors. Their main difference lies in the short-term price mechanism. The World Gold Council emphasizes safe-haven performance after a crisis begins; ING emphasizes the structural support created by central-bank demand; and State Street emphasizes that energy prices, real interest rates, and the USD may temporarily offset that support.

The materials also leave clear gaps. They do not provide a complete net-buying and net-selling table for all central banks over the same statistical period, so the pace of change in global central-bank gold purchases cannot be determined solely from the cases of Poland, China, and several other countries. ING also explicitly warns that at record prices, overall physical gold demand becomes more price-sensitive. This does not conflict with its statement that central-bank demand is relatively insensitive to price, because the two refer to different buyers.

The answer is reserve security, not short-term gains

According to ING, the core reason some central banks continue buying gold is that it reduces national reserves’ dependence on a single currency and the external financial system, while preserving an asset that can be held over the long term as sanctions, conflict, or policy uncertainty increase. Poland’s higher absolute reserve target and China’s consecutive purchases are concrete examples of this logic.

Taken together, the three reports support the following answer: central-bank gold buying is first and foremost a long-term reserve decision, while crisis hedging strengthens the rationale for that decision. Whether gold prices rise immediately still depends on interest rates, the USD, oil prices, and market funds. Because there is no globally consistent dataset on central-bank net purchases, these materials can explain the motivations and mechanisms, but cannot prove that all central banks are buying with the same intensity.

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Source institutions：ING、World Gold Council、State Street Global Advisors

This content is for reading and understanding research reports. It does not constitute investment advice or trading signals.