Is There a "Shortcut" for Gold to Reach $6,000? The Ultimate Support Behind It: Central Banks!

In this historic bull market for gold, the "gold-buying spree" by central banks worldwide is undoubtedly a key driving force behind the rise in gold prices. Although the true scale of gold purchases by these "central bank moms" remains a mystery, few industry insiders believe they will stop in the future...

According to estimates by Goldman Sachs analysts, central banks globally are currently adding roughly 80 mt of gold each month—valued at approximately $8.5 billion at current prices. Most of these purchases are conducted privately and secretly.

Data from the World Gold Council also leads to a similar conclusion: Central banks and sovereign wealth funds are currently "sweeping up" approximately 1,000 mt of gold annually, equivalent to at least a quarter of the world's annual gold mine production. A survey conducted by HSBC in January this year among 72 central banks revealed that more than one-third of the respondents plan to buy more gold in 2025, with none intending to sell.

During periods of geopolitical tension, gold often serves as a safe haven.

Although this buying spree began before US President Trump launched a global trade war, it still underscores the growing concerns of some countries about over-reliance on the US dollar, the world's dominant reserve currency. The scorching rally in gold prices over the past few years has only further increased the allure of the precious metal.

A prime example is that,the National Bank of Kazakhstan was among the largest gold sellers among global central banks last year. However, according to Governor Daniyar Akishev of the National Bank of Kazakhstan, the bank has reverted to being a net buyer this year and plans to continue increasing its reserves.

Akishev stated, "Gold is often seen as a safe-haven asset, but in the current circumstances, considering all the panic, tariffs, and reshaping of global trade, it has also become an investment asset."

Is there a "shortcut" to $6,000?

For Goldman Sachs, the belief that the gold-buying spree by central banks will continue is the main reason for the bank's persistence in its forecast of $3,700 per ounce by the end of the year.

As of Wednesday's Asian session, spot gold prices were recently trading near $3,365, not particularly far from the historical peak of $3,500 set in April.

From the perspective of global central bank activities, after the Russia-Ukraine conflict in 2022 led the US and its Western allies to freeze Russia's foreign exchange reserves, the pace of gold purchases by "central bank moms" worldwide nearly doubled. This move to "weaponize finance" has prompted many central banks to consider diversifying their reserves, while the renewed threat of inflation and speculation that the US government may not be as accommodating to foreign creditors have further highlighted gold's appeal to policymakers.

Adam Glapiński, governor of the National Bank of Poland, one of the largest gold buyers in recent years, said, "Gold is the safest reserve asset. It has no direct link to the economic policies of any country, can withstand crises, and can maintain its real value over the long term."

Massimiliano Castelli, managing director at UBS Asset Management, which provides strategic advice to many central banks, said, "In addition to the risk of sanctions, earlier this year, speculation that the Trump administration would deliberately pursue a policy of devaluing the US dollar, as well as threats to the independence of the US Fed, have made some institutions uneasy."

Castelli said, "Given the threats to the US dollar, its share in international reserves may face a sustained decline—perhaps slightly faster than the pace we have seen in the past few years, as central banks are diversifying into other currencies and gold."

That said, with limited issuance of bonds denominated in other currencies, central banks have limited options when seeking diversification. However, the growing inflow of funds into gold has become an inevitable trend and may further support the rally that began in late 2022, when gold prices doubled.

According to JPMorgan Chase, even if only 0.5% of foreign-held US assets are shifted into gold in the coming years, it would be enough to drive gold to $6,000 per ounce by 2029.

Evy Hambro, head of thematic and sector investing at BlackRock, said, "The gold market is large, but the US dollar market is even larger. Even a small amount of funds flowing from the US dollar market into gold would have a significant impact."