As gold prices surge above $4,000 per ounce, a critical question arises: does gold still serve a purpose in modern central bank reserves?
While gold has historically been viewed as a safe haven and store of value, today’s economic realities challenge that perception. With limited practical use and high volatility, gold’s role in monetary policy is increasingly difficult to justify.
Gold’s Intrinsic Value Remains Minimal
Global above-ground gold stocks reached 216,265 tonnes at the end of 2024. Yet only 15% of this is used in technology and industry. The rest? Almost half is classified as jewellery — which often functions as disguised investment demand — while 22% sits in the form of coins, bars, and ETFs. Central banks themselves hold 17%.
What does this breakdown reveal? That the majority of gold demand is speculative or symbolic — not functional. And the belief in gold’s intrinsic value often outweighs its actual utility.
A Price Surge Built on Sentiment
Gold prices have risen over 50% in 2025 alone. Compared to 2009 levels (around $1,100/oz), the price has surged nearly 260%. These are extraordinary returns — but they’re not backed by fundamentals.
The cost to extract one ounce of gold averages around $1,500, according to estimates from the World Gold Council. In 2024 alone, the global supply of newly mined gold was nearly 5,000 tonnes — a substantial allocation of capital and natural resources, poured into producing an asset with little real-world application.
Gold is not a productive asset. It does not yield returns, nor does it contribute to innovation, infrastructure, or economic development. It is mined at great cost, stored securely — often back underground — and held primarily because of tradition.
Gold’s Comparison to Bitcoin and Digital Assets
Gold is often compared to cryptocurrencies, especially in times of monetary instability. Both are decentralized stores of value. Both are finite. And both are highly speculative.
But unlike digital currencies — especially those issued by central banks or pegged to fiat currencies — gold cannot function as an efficient means of payment. It’s physical, expensive to store, and slow to transfer.
Digital finance is evolving rapidly. As blockchain-based payment systems and tokenized assets gain traction, gold’s strategic role weakens further.
Central Banks Are Buying More — But Should They?
Despite these challenges, central banks have increased their gold holdings by more than 1,000 tonnes annually since 2022. By the end of 2024, gold represented 20% of global central bank reserves — surpassing euro-denominated assets, which stood around 16%.
This shift may reflect short-term hedging strategies, but from a long-term perspective, it raises concerns. Concentrating public wealth in a single, volatile commodity — one with negligible intrinsic value — introduces unnecessary risk into national reserve portfolios.
In a world of geopolitical tensions and monetary uncertainty, gold may feel like a safe bet. But sentiment is not strategy. And the costs — both economic and opportunity-based — are mounting.
Strategic Opportunity: Sell Into the Surge
Selling gold now offers strategic advantages.
First, it allows institutions to capitalize on historic highs — reallocating funds into diversified, yield-generating assets. Second, it signals a modern, forward-looking approach to reserve management, focused on tangible value and long-term resilience.
Private investors with high risk tolerance may still view gold as a speculative bet. But public institutions should not operate under the same assumptions.
Central banks have a responsibility to optimize capital use, reduce portfolio volatility, and avoid legacy-driven inertia. Holding physical gold fails all three tests.
What Comes Next?
As the financial landscape becomes more digitized and decentralized, the traditional pillars of reserve management are being redefined. Gold, once a cornerstone, now looks more like an expensive relic.
Strategic reserve policy must evolve. Diversification, liquidity, and yield should be guiding principles — not nostalgia.
Gold’s shine may remain. But its strategic logic no longer holds.