


It is not exactly a secret that gold is seen as a “safe haven” investment. This helps explain the increase in the metal’s price, fueled in part by diminishing confidence in the dollar’s ability to fulfill that role. That reduction in confidence has been reinforced by the Trump administration’s policies, most recently the attacks on the Fed’s independence. These have added fresh fuel to the inflation worries that have been tarnishing the dollar’s appeal since the “Biden” era. Aggressive U.S. sanctions policies have also been gnawing away at the greenback’s bolt-hole charm for a while now. The effect of the latter may also be influencing the decision by various central banks to repatriate some or all of their bullion.
Physical security and access to a country’s gold are increasing concerns. The trend began about a decade ago when some central banks decided to move some of their gold holdings back from the US, the UK and France. The issue gained greater focus when the G7 countries froze Russia’s foreign exchange reserves following the invasion of Ukraine in 2022. Concerns intensified when the G7 countries decided to use frozen Russian assets to fund Ukraine’s reconstruction efforts.
Since 2022 countries have increased their repatriation. India announced in 2024 that it repatriated about 100 tonnes of gold back to India from the UK. A study from 2024 shows that 68% of central bank respondents keep their gold onshore, compared to roughly 50% in 2020.
Central banks have not just been moving gold, they have also been buying it. According to Goldman Sachs, they have increased their purchases of gold five-fold since Russia’s full-scale invasion of Ukraine.
Goldman also adds this interesting what if:
We estimate that if 1% of the privately owned US Treasury market were to flow into gold, the gold price would rise to nearly $5,000 an ounce, assuming everything else constant.
Moreover, via the Financial Times:
“A scenario where Fed independence is damaged would likely lead to higher inflation, lower stock and long-dated bond prices and an erosion of the dollar’s reserve currency status,” said Daan Struyven, co-head of global commodities research at Goldman Sachs.
Trump’s “golden age” may turn out to mean something very different than first advertised.
The corollary of lower Treasury prices is higher interest rates. It will be ironic, to say the least, if the efforts by the administration to bully the Fed into lowering its rates means that the U.S. ends up paying more on its debt.