Gold’s Strength During Global Unrest: Central Bank Buying and Reasons to Consider GLD Investments

In 2025, the global economy is being shaped by two powerful trends: ongoing geopolitical uncertainty and the persistent efforts of central banks to diversify their reserves. These factors have solidified gold’s position as a key asset for managing systemic risks, with the SPDR Gold Shares ETF (GLD) serving as a vital tool for investors looking to protect themselves from broad economic turmoil.

Central Banks: The Dominant Force in Gold

Central banks now play a leading role in the gold market, consistently purchasing more gold than any other sector. In 2023, they collectively added 1,037 tonnes to their reserves worldwide—only slightly below 2022’s record of 1,082 tonnes—showing a continuing strategic pivot. The People’s Bank of China (PBoC) was at the forefront, acquiring 225 tonnes in 2023, its largest annual addition since 1977. The PBoC’s total gold holdings now stand at 2,235 tonnes, which is about 4% of its overall reserves, aligning with China’s broader move away from the U.S. dollar in response to rising geopolitical tensions.

Poland’s central bank also made significant moves, increasing its gold holdings by 57% in 2023 to reach 359 tonnes. Likewise, after long periods of inactivity, the central banks of the Czech Republic and Libya have resumed gold accumulation. These actions are part of a broader movement: according to the World Gold Council, 76% of surveyed central banks anticipate that gold will make up a larger portion of their reserves within five years.

The Gold Premium Amid Geopolitical Uncertainty

The rising demand from central banks is primarily a response to a unique combination of political and economic risks. Events like Russia’s invasion of Ukraine, Western sanctions imposed on Russia, and the declining dominance of the U.S. dollar have all prompted countries to reassess their reserve management. Gold, valued for its neutrality and inherent worth, has become the asset of choice in times of crisis.

Inflation has further fueled this movement. Although central banks in advanced economies have increased interest rates to fight inflation, waning confidence in fiat currencies has reduced the opportunity cost of holding gold, which doesn’t yield interest. Gold's proportion of global central bank reserves has climbed from 15% in 2020 to nearly 20% by 2024, surpassing U.S. Treasuries in total value—an uncommon achievement.

GLD: A Tactical Shield in Volatile Markets

For individual investors, the SPDR Gold Shares ETF (GLD) provides a straightforward and efficient way to benefit from gold’s stability. GLD’s price movement closely follows that of physical gold, and in 2023, it rose 27% compared to the previous year, reflecting heightened central bank buying. Thanks to its strong correlation with gold prices, GLD offers investors exposure to the metal without the complexities of physical storage and ownership.

The argument for increasing stakes in GLD is supported by ongoing supply challenges. Gold production from mines is contracting at a rate of 2–3% annually, and developing new mining projects can take a decade or more. Meanwhile, central banks are widely expected to continue accumulating gold, with 95% of those surveyed planning to boost their reserves in the coming year. This persistent gap between supply and demand is likely to favor gold prices, benefiting GLD investors.

Potential Challenges and Factors to Watch

Although prospects for gold remain strong, investors should be aware of possible challenges. A swift recovery of the U.S. dollar or a prolonged decrease in inflation could exert downward pressure on gold temporarily. Nevertheless, the underlying forces—such as geopolitical divisions, moves away from the dollar, and ongoing inflation risks—make it unlikely that these factors will disrupt the broader upward momentum for gold.

Conclusion: Preparing for a Gold-Centered Future

The intersecting influences of global political risks and central bank buying have transformed gold’s significance in the world’s financial system. As an instrument for protecting against systemic threats, GLD presents a strong case for portfolio diversification. With central banks providing price support and supply growth constrained, the rationale for investing in GLD is more compelling than ever. In a period marked by economic unpredictability, both gold and GLD remain reliable stores of value.