Gold surpasses US Treasuries! Central Bank buys 900 tons for the first time in 30 years, a huge shift in global trust.

Since the mid-1990s, gold held by foreign Central Banks has first surpassed U.S. Treasury bonds, marking a significant shift in global trust. Data from the World Gold Council shows that gold purchases by Central Banks are expected to reach 900 tons in 2025, double the long-term average for the fourth consecutive year, and they have been buying gold for 16 consecutive years. Analysts point out that the collapse of the Federal Reserve (FED) reverse repurchase agreement balance has led capital to seek hard currency that cannot default.

First reversal in 30 years, Central Bank gold holdings surpass US Treasury bonds

(Source: Bloomberg)

The data shared by Barchart confirms this historic crossover, with Central Banks around the world set to continue record gold purchases in 2025. This milestone indicates a significant shift in the perspective of global powers regarding safety, liquidity, and trust. The quiet rotation from paper currency to metal marks a potential turning point in the global financial framework.

Data from the World Gold Council shows that central banks around the world net purchased 19 tons of gold in August alone, following a 10-ton increase in July. As a result, the gold purchase volume by central banks this year is expected to reach approximately 900 tons. This will mark the fourth consecutive year that global gold purchases exceed twice the long-term average. Even more astonishing, a letter from Kobeissi indicates that central banks have been buying gold for 16 consecutive years. This is the longest duration ever, and prior to this, these financial institutions had net sold gold for more than 20 consecutive years before 2010.

This 180-degree attitude shift reveals deep structural changes. In the 1990s and early 2000s, central banks around the world generally regarded gold as a “barbarous relic,” with U.S. Treasury bonds seen as the ultimate safe asset. However, the 2008 financial crisis, the European debt crisis, and the recent political polarization and debt mismanagement in the United States have gradually eroded this belief. In the first half of 2025, 23 countries increased their gold reserves. “Central banks cannot stop buying gold,” wrote Kobeissi.

The geopolitical implications of this trend cannot be ignored. Countries like China, Russia, and India have been the main buyers of gold, and these nations have clearly expressed their strategic intent to reduce reliance on the US dollar and US Treasury bonds. Gold does not require the credit endorsement of any country, is not affected by sanctions, and will not depreciate due to a government's policy mistakes. For countries seeking financial sovereignty, gold is the most ideal strategic reserve asset.

U.S. Treasury Trust Crisis, Liquidity Drying Up Drives Capital Flight

The reasons are far deeper than inflation. Macro researcher Sunil Reddy emphasized that the recent rise in gold prices is related to the collapse of the Federal Reserve's reverse repurchase balance. The reverse repurchase balance is a pool of funds used for the safe overnight storage of excess liquidity. “When these balances nearly disappear, gold prices fluctuate vertically… Capital seeks something that cannot default—hard currency. Gold is no longer just an inflation hedge; it is becoming pure collateral—an asset of ultimate trust,” he said.

The Federal Reserve's reverse repo balance has fallen from over $2 trillion at its peak in 2022 to several hundred billion dollars by 2025. This evaporation of liquidity signifies a lack of safe havens in the financial system. When money market funds and other institutional investors cannot park excess cash at the Federal Reserve, they are forced to seek other safe assets. U.S. Treasuries should have been the first choice, but when Treasury yields cannot compensate for inflation and risk, gold naturally becomes the alternative.

This trust gap is widening. Reports indicate that for every dollar the U.S. government currently earns, nearly 23 cents are used to pay interest. This ratio is extremely rare in history, even exceeding defense spending or social security expenditures. When nearly a quarter of government revenue is used solely to repay debt interest, investors are forced to question the sustainability of this fiscal model. At the same time, confidence in U.S. Treasury bonds is waning among foreign investors due to political gridlock and escalating debt.

Three Structural Challenges Facing U.S. Treasury Bonds:

Out of Control Fiscal Deficit: Annual deficits of several trillion dollars have caused the debt to continue to swell to over 35 trillion dollars.

Political Polarization: The recurring debt ceiling crisis threatens the credit rating of U.S. Treasury bonds.

De-dollarization Trend: Many countries are seeking to reduce their reliance on the US dollar and US Treasury bonds, weakening the demand base for US Treasury bonds.

In this context, analysts say that gold itself has not changed, but its measuring standards are collapsing. Since the 1970s, the exchange rates of major currencies such as the British Pound and Swiss Franc against gold have depreciated by 70% to 90%. This is not gold appreciating, but fiat currencies depreciating. When central banks around the world are printing money, the only asset that cannot be printed naturally gains a premium.

Digital Gold Bitcoin is waiting for the rotation moment

However, even the dominance of gold is facing new challenges. Cryptocurrency investor Lark Davis pointed out that despite gold prices dropping 5% last week, marking the largest single-day decline since 2013, Bitcoin rose by 3%. He said, “If BTC absorbs a small portion of gold's market value, it could mark the beginning of a crazy rally… 1% equals $134,000, 3% equals $188,000.”

His viewpoint echoes that of Mister Crypto's post, which states “the next is digital gold,” suggesting that a rotation is quietly brewing. The total market capitalization of gold is approximately 13 trillion USD, while Bitcoin's current market capitalization is around 2 trillion USD. If only 1% of gold funds flow into Bitcoin, it would bring an additional demand of 13 billion USD, enough to significantly drive up the price of BTC.

The comparison between Bitcoin and gold is increasingly becoming a hot topic in the investment community. Both have characteristics of scarcity, are not controlled by a single government, and can serve as a store of value. However, Bitcoin has advantages that gold does not possess: divisibility, transferability, and verifiability. You can send Bitcoin to any corner of the world in a matter of seconds, while transporting gold requires logistics, insurance, and trusted intermediaries.

However, if the pullback in gold prices appears to be severe, industry insiders indicate that this is mainly mechanical. A large block trade of an ETF (Exchange-Traded Fund) triggered algorithmic volatility. An analyst stated, “There are no significant players selling off.” China's gold ETFs even increased their holdings during the sell-off. This technical pullback instead provides a better entry opportunity, and the long-term trend has not changed.

The era of hard assets has arrived, and trust in fiat currency continues to collapse

Considering all the factors above, the guardians of world currency (including institutions that issue fiat currency) are decisively turning to hard assets. “If those who control the printing press are hoarding gold, what should the rest of us be hoarding?” Crypto Jargon commented. This question strikes at the core: when even the Central Bank does not trust paper money, why should ordinary investors continue to hold it?

The current state of global finance is that central banks around the world have shifted from selling gold for decades to now purchasing record amounts of gold each year, which could determine the direction of the market and currency itself over the next decade. This is not only an adjustment in asset allocation but also a fundamental questioning of the existing financial order. U.S. Treasury bonds have traditionally been viewed as “risk-free assets,” but as foreign central banks begin to reduce their holdings of U.S. debt and increase their gold reserves, this myth is being shattered.

Three Major Trends Investors Should Pay Attention To:

Central Bank gold purchases will continue: The trend of purchasing for 16 consecutive years will not easily reverse.

Structural Decline in Demand for U.S. Treasuries: De-dollarization drives foreign central banks to reduce their holdings of U.S. Treasuries.

Digital Gold Rotation is Coming: Bitcoin may absorb some of the gold capital inflow.

For individual investors, this macro trend provides clear directional guidance. Holding a certain proportion of hard assets (gold, bitcoin, or other inflation-resistant assets) is no longer an aggressive strategy, but a rational response to Central Bank behavior. When the institutions that issue currency are buying gold, it is a wise choice to follow the flow of smart money.