Gold Surges on Bank Buying Spree

Gold hit a record high of $1,825 per ounce in August 2011, then experienced a sharp decline. By September 2023, it stood at $1,840. Gold investors faced twelve years of exhaustion and despair. During this period, stocks, government bonds, corporate bonds, and alternative assets delivered high returns. From this perspective, gold investors faced an opportunity cost—not only did they fail to profit from gold for twelve years, but they also missed out on returns from other financial assets.

The upward movement in gold prices that began in the fourth quarter of 2023 can be attributed to various factors. I place the physical gold demand from emerging market central banks at the top of this list. Of course, the first country that comes to mind in the emerging markets category is China. In the final months of 2023, the People’s Bank of China (PBOC) began physical purchases after a long hiatus. In my view, this marked a turning point. The demand from central banks following China’s lead triggered a new upward trend. When the PBOC began making purchases, gold was trading at $1,800 per ounce. Within a year and a half, it surged to $3,430.

Over time, the effects of geopolitical tensions, central bank monetary policies, dollar depreciation, and the chaos created by the Trump administration’s tariff policies became evident. In the first seven months of 2025, gold long positions represented the most crowded position among financial assets. Such accumulations are, naturally, self-reinforcing processes. As a financial asset’s price breaks records and new peaks make headlines, long positions swell. When even those unfamiliar with market dynamics speak enthusiastically about gold, caution is warranted.

The PBOC has been purchasing gold again for the past eight months after taking a brief pause in previous months. I believe this factor is what has kept gold prices within a certain range in recent months. Regarding gram gold prices, the trajectory of exchange rates and the per-ounce price of gold are critical. The gradually rising dollar exchange rate domestically supports gram gold prices. For the per-ounce price of gold, one must monitor the dollar’s status, global interest rates, and geopolitical developments.

Following Trump’s election as U.S. president, the American dollar came under scrutiny. Trump, who creates uncertainty in the global economy and markets through tariffs, needs a weak dollar to achieve his economic targets of trade surplus and low budget deficit. Trump is pressuring the Fed on interest rate cuts, demanding an immediate reduction of the policy rate to 1 percent. Both dollar depreciation and expectations of lower interest rates in the coming period are pushing institutional investors toward portfolio diversification.

The Central Bank of the Republic of Türkiye (CBRT) is also making substantial gold purchases to diversify its reserves. The CBRT’s gold position should be evaluated from this perspective. Central banks will continue to be important players in the gold market in the upcoming period.

the SIlver RevolutIon and StrategIc ImplIcatIons

While gold captures headlines, silver quietly achieved its highest levels in 14 years, driven by industrial demand from solar panels and electric vehicles. India shattered records with 8,000 tons of silver imports in 2024, surpassing even traditional gold import volumes. China operates as both producer and consumer, wielding dual influence in silver markets.

Investment banks dramatically underestimated the rally. Early 2025 consensus targeted $2,495 year-end; current prices hover near $2,950. JPMorgan revised targets to $3,400 by mid-2026, while Citi’s bullish scenario envisions $3,500. These revisions signal gold’s transformation from tactical hedge to strategic portfolio cornerstone.

The traditional inflation-gold correlation has fractured. Despite declining inflation across major economies in 2024-2025, gold sustained record-breaking momentum. Price drivers now center on monetary system confidence and geopolitical risk premiums rather than consumer price indices.

Bank of America’s “crowded trade” warnings merit attention, yet structural demand from central banks creates a resilient foundation beneath speculative positions. The dollar’s share in global payments retreated to 58%, while rising gold reserves function as insurance policies against currency concentration risks.

Modern central banking strategy increasingly views gold not as crisis-era memory but as permanent infrastructure for multipolar financial architecture. The risk for investors may not be timing the trend’s end, but being absent when sovereign wealth migration accelerates further.

Beyond Traditional Investment LogIc

As of August 2025, gold is challenging the $3,000 per ounce threshold—a dramatic transformation from the $1,800 levels just two years ago. This surge transcends conventional monetary policy narratives. The West’s freezing of Russia’s reserves created a seismic shift in global monetary order, with dedollarization becoming the new strategic imperative.

According to World Gold Council data, central banks purchased a net 1,037 tons in the past year, marking the largest annual demand in modern history. China alone accounts for one-third of these purchases through nearly 24 months of continuous buying. Türkiye, Poland, India, and Singapore are similarly diversifying their reserves, reducing dollar dependency. Gold has evolved from a “safe haven” to a sovereignty instrument.

Investment banks’ year-end projections of $2,495 at the start of 2025 now appear conservative with prices reaching $2,950. JPMorgan targets $3,400 by mid-2026, while Citi envisions $3,500 in bullish scenarios. These revisions reflect gold’s transition from tactical to strategic asset class status.

The traditional inflation-gold correlation has weakened. Despite declining inflation in many economies during 2024-2025, gold continued breaking records, suggesting prices are now driven more by monetary system confidence and geopolitical risk premiums. While Bank of America warns of “crowded trades,” the structural foundation remains solid due to persistent central bank demand alongside speculative interest. Gold is no longer merely a crisis hedge but the permanent backbone of an emerging multipolar financial order.