Why Central Banks Are Hoarding Gold: The BRICS Factor and What It Means for the UK Gold Market
Central banks bought over 1,000 tonnes of gold annually for three consecutive years. BRICS launched a gold-backed pilot currency. 76% of central banks plan to buy more. This is not a bubble — it is a structural shift in global finance, and it explains why gold went from $2,000 to $5,600 in two years.
Why Should UK Gold Owners Care?
Central bank gold buying at 1,000+ tonnes per year creates a structural floor under gold prices. Even when short-term crashes occur (like the 11% drop on 31 January 2026), the buying pressure from sovereign nations is relentless. London is the global centre for gold trading — the Bank of England vaults hold 400,000 gold bars. The UK gold market is directly connected to this global shift.
The Numbers: Record Central Bank Buying
1,000+
Tonnes bought per year (2023-2025)
3x
The 2010-2020 annual average
76%
Of central banks plan to buy more
75%
Plan to reduce dollar exposure
To put these numbers in context: the world's gold mines produce approximately 3,644 tonnes per year (WGC, 2024 data). Central banks alone absorbed 1,045 tonnes in 2024 — nearly 29% of total mine supply. Add retail investment demand (1,180t), jewellery demand (2,086t), and industrial use (326t), and total demand exceeded supply by over 900 tonnes, met only by recycling.
Why This Matters for Price
When a buyer responsible for ~30% of demand is price-insensitive (central banks buy regardless of whether gold is at $2,000 or $5,000), it fundamentally changes the market dynamic. This is not speculative retail buying that evaporates at the first sign of trouble — it is sovereign nations building strategic reserves over decades.
Who Is Buying the Most Gold?
Recent Purchases
225 tonnes (2024-2025)
Motivation
De-dollarisation, strategic reserve building, yuan internationalisation
Trend
Accelerating
Recent Purchases
83 tonnes (2024-2025)
Motivation
Reserve diversification, cultural demand, rupee stability
Trend
Steady increase
Recent Purchases
130 tonnes (2023-2025)
Motivation
NATO border security hedge, EU diversification
Trend
Aggressive buyer
Recent Purchases
98 tonnes (2024-2025)
Motivation
Lira instability hedge, inflation protection
Trend
Resuming purchases
Recent Purchases
Undisclosed (sanctions limit reporting)
Motivation
Sanctions-proofing, dollar replacement, BRICS backing
Trend
Strategic accumulation
Recent Purchases
75 tonnes (2023-2025)
Motivation
Reserve diversification, financial hub credibility
Trend
New major buyer
De-Dollarisation in Plain English
The US dollar's share of global foreign exchange reserves has fallen from 72% in 2000 to approximately 58% in 2025, according to IMF COFER data. Meanwhile, gold's share of central bank reserves has risen from 10% to over 17%. This is not abstract — it represents trillions of dollars being reallocated from dollar bonds to physical gold.
When Western nations froze over $300 billion of Russia's dollar and euro reserves in February 2022 (Reuters), it sent a clear message to every non-allied nation: your dollar reserves can be weaponised.
Central bank gold buying jumped from 450 tonnes in 2021 to over 1,080 tonnes in 2022 — a 140% increase in a single year. The correlation was immediate and unmistakable.
- Dollar share of reserves: 72% (2000) → 58% (2025)
- Gold share of reserves: 10% (2000) → 17% (2025)
- Central bank gold buying: 450t (2021) → 1,080t (2022) → 1,037t (2023) → 1,045t (2024)
- SWIFT alternatives: CIPS (China) now processes $80B+ daily
Source: WGC Gold Demand Trends, IMF COFER
The BRICS Gold Timeline
The shift from dollar dominance to a more multi-polar monetary system has been building for years. Here are the key milestones:
The catalyst that accelerated global de-dollarisation. Demonstrated that dollar holdings could be weaponised, pushing many nations to seek alternatives.
Saudi Arabia, UAE, Iran, Ethiopia, and Egypt join. The expanded bloc covers ~45% of world population and ~35% of global GDP.
More than double the 2010-2020 average. Purchasing is concentrated among BRICS and aligned nations.
Members agree to build digital payment infrastructure and expand trade using local currencies. Framework for gold-backed settlement unit formalised.
Pegged to 1 gram of gold, backed 40% by physical gold and 60% by BRICS national currencies. Designed for international trade settlement.
World Gold Council survey shows three-quarters of central banks intend to add more gold over the next 5 years, while 75% plan to reduce dollar exposure.
The BRICS Gold-Backed Currency: “The Unit”
Key Features of “The Unit”
Peg
1 Unit = 1 gram of gold
Backing
40% physical gold, 60% BRICS national currencies
Purpose
International trade settlement between BRICS nations
Status
Pilot phase launched 31 October 2025
The Unit is not designed to replace the dollar overnight. It is a trade settlement mechanism — a way for BRICS nations to trade with each other without using the US dollar as an intermediary. China can pay Saudi Arabia for oil in Units, backed by gold, rather than converting yuan to dollars to riyals.
Even if The Unit captures just 10-15% of BRICS internal trade, it would represent hundreds of billions of dollars in value that needs to be backed by physical gold. This is a powerful, long-term demand driver.
Scale of BRICS
~45%
of world population
~35%
of global GDP
~50%
of global gold production
London: The Global Gold Trading Hub
The London Bullion Market Association (LBMA) sets the global benchmark gold price twice daily. London is where most of the world's gold is traded. The LBMA's Good Delivery List defines which refiners produce investment-grade gold bars accepted worldwide.
This infrastructure means London benefits from rising gold demand regardless of whether the UK government itself buys gold.
The Bank of England holds approximately 400,000 gold bars in its vaults — the second-largest gold vault in the world after the Federal Reserve Bank of New York.
However, only about 6% (310 tonnes) belongs to the UK. The rest is held on behalf of other nations' central banks. The UK has not actively added to its gold reserves for many years, in contrast to the aggressive buying by China, India, and Poland.
What This Means for UK Gold Owners
Structural Floor Under Prices
Central banks absorbing ~30% of annual mine supply creates a price floor that did not exist before 2022. In the 2011 gold rally, central banks were net sellers — that buying reversed and gold fell 45% over 4 years. Today they are net buyers at 1,000+ tonnes/year with no sign of slowing.
The proof: even the 11% crash on 31 January 2026 was absorbed within a week. The WGC reported net inflows into gold ETFs during the crash itself.
But Volatility Remains
Structural demand does not eliminate drawdowns. The Warsh nomination proved a single event can cause an 11% drop in a day. The 2011-2015 bear market shows that even strong fundamentals can be overwhelmed by dollar strength and rising real rates.
Practical takeaway: If selling scrap gold or unwanted jewellery, current prices are exceptional by any historical measure. If buying as an investment, pound-cost averaging reduces timing risk. Gold Sovereigns and Britannias are CGT-free for UK investors.
The Bear Case: What Could Go Wrong?
No investment thesis is without risk. Here are the factors that could undermine the central bank gold buying narrative:
Stronger US Dollar (DXY)
Gold and the dollar have a -0.8 correlation over 20 years. Kevin Warsh as Fed Chair could push the DXY from ~104 to 110+, a headwind similar to the 2014-2015 dollar rally that coincided with a 20% gold decline. The dollar surged 3.1% on the day of Warsh's nomination alone.
BRICS Fragmentation
BRICS members have competing interests: India-China border tensions, Saudi Arabia's balancing act between the US and China, and economic disparity between members. The original BRICS bank (NDB) has disbursed only $35B since 2015 — far less than the World Bank. Execution risk on “The Unit” is significant.
Central Banks Slow Buying
China paused disclosed gold purchases for 6 months in mid-2024 before resuming. At $5,000+/oz, the cost of accumulation rises dramatically — 1,000 tonnes now costs ~$160B vs ~$60B at 2020 prices. Price-sensitive emerging market central banks may reduce buying at these levels.
Rising Real Yields
Gold pays no income. When US 10-year real yields exceeded 2% in October 2023, gold briefly stalled. If Warsh pushes real yields above 2.5% through rate hikes, the opportunity cost of holding gold increases significantly. This was the primary driver of gold's 2013-2015 bear market.
Frequently Asked Questions
Central banks are buying gold at record rates primarily to diversify away from the US dollar. After Western sanctions froze Russia's dollar reserves in 2022, many nations accelerated gold purchases as a sanctions-proof reserve asset. China, India, Poland, and Turkey are among the largest buyers. Gold provides neutral, portable wealth not controlled by any single nation.
On 31 October 2025, BRICS launched a pilot currency called 'The Unit', pegged to 1 gram of gold and backed by a 40/60 mix of physical gold and BRICS national currencies. It is designed for international trade settlement between BRICS nations. The 17th BRICS Summit in Brazil (July 2025) agreed to build digital payment infrastructure to support it.
Central banks have purchased over 1,000 tonnes of gold annually for three consecutive years (2023, 2024, and 2025). This is more than double the average purchasing rate from 2010-2020. In Q1 2025 alone, 244 tonnes were added. In Q2 2025, 166 tonnes were purchased, 41% above the quarterly average.
Central bank buying creates a structural floor under gold prices, but short-term volatility can still occur (as seen in the January 2026 crash). The long-term outlook supported by central bank demand is positive. Major banks forecast gold at $4,500-$5,500 over 12 months. However, a stronger US dollar or reduced geopolitical tensions could act as headwinds.
The Bank of England holds approximately 310 tonnes of gold reserves but has not actively bought gold for many years. Most of the 400,000 gold bars stored in the Bank of England's vaults belong to other nations' central banks. The UK benefits indirectly from gold demand through London's role as the global gold trading hub via the LBMA.
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Related Guides
Sources
- World Gold Council — Gold Demand Trends (quarterly data on central bank purchases)
- World Gold Council — Gold ETF Holdings and Flows (February 2026)
- World Gold Council — Gold Market Commentary (January 2026)
- World Gold Council — Central Bank Gold Reserves by Country
- IMF COFER — Currency Composition of Official Foreign Exchange Reserves
- LBMA — London Gold Price Data
- Bank of England — Gold Vault Information
- Reuters — Russia's frozen $300B reserves
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Disclaimer: This article is for informational purposes only and does not constitute financial advice. Gold prices are volatile and past performance does not guarantee future results. Central bank purchasing patterns can change. Always conduct your own research and consider consulting a qualified financial advisor before making investment decisions. London Gold Exchange is an information service and does not buy, sell, or hold gold on behalf of users.