Gold's Endurance During Geopolitical Unrest: Central Bank Purchases and Reasons to Consider Holding GLD

In 2025, the global economy is shaped by two intertwined trends: escalating geopolitical uncertainty and central banks’ ongoing drive to diversify their reserves. These forces have reinforced gold’s status as a key tool for managing systemic risk, with the SPDR Gold Shares ETF (GLD) becoming an essential choice for those wanting protection from widespread economic turmoil.

Central Banks: Gold’s Powerful New Players

Central banks now hold the most sway in the gold market, their acquisitions surpassing all other sources of demand. In 2023, central banks worldwide increased their gold reserves by 1,037 tonnes, only slightly less than the record-setting 1,082 tonnes in 2022, highlighting a persistent shift in strategy. Leading the way was the People’s Bank of China (PBoC), which added 225 tonnes—its largest annual purchase in over four decades—bringing its total holdings to 2,235 tonnes, making up 4% of its total assets. This move is part of China’s broader initiative to reduce dependence on U.S. dollars in light of ongoing global tensions.

Poland’s central bank made significant moves as well, increasing its gold reserves by 57% in 2023 to reach 359 tonnes. The Czech National Bank and Central Bank of Libya also resumed gold purchases after long periods of inactivity. These actions reflect a larger pattern: according to the World Gold Council, 76% of central banks surveyed anticipate gold will make up a greater portion of their portfolios over the next five years.

Geopolitical Tensions Fueling the Gold Premium

The sharp rise in gold demand from central banks is a response to a unique mix of geopolitical and economic threats. Russia’s invasion of Ukraine, Western sanctions targeting Russia, and the diminishing dominance of the U.S. dollar have all compelled nations to rethink their reserve allocations. Gold’s inherent value and its political neutrality have made it the preferred safe haven.

Rising inflation is also contributing to gold’s appeal. Even as central banks in advanced economies hike interest rates to counter inflation, diminished trust in paper currencies has lessened the opportunity cost of holding gold, which does not yield income. Gold’s share of global central bank reserves climbed from 15% in 2020 to almost 20% by 2024, and it now surpasses U.S. Treasuries in total holdings—an unusual achievement.

GLD: An Essential Shield in Volatile Markets

The SPDR Gold Shares ETF (GLD) provides investors with a highly liquid and efficient way to gain exposure to gold’s stability. The ETF’s price movement closely reflects that of physical gold, and in 2023, it delivered a 27% year-over-year return in tandem with surging central bank purchases. Thanks to its nearly perfect correlation with gold prices, GLD serves as an effective stand-in for direct gold ownership, minus the associated storage and handling issues.

The rationale for increasing GLD holdings is bolstered by tightening supply. Gold mining output is declining by 2–3% annually, and new mining projects now face approval timelines of 10–15 years. At the same time, central banks are expected to keep buying, with 95% of surveyed banks planning to add more gold to their reserves within the next year. This persistent imbalance between supply and demand is likely to drive gold prices higher, benefiting GLD investors.

Potential Risks to Consider

Despite the bullish outlook for gold, investors should remain alert to possible setbacks. A rapid strengthening of the U.S. dollar or a prolonged period of lower inflation could put downward pressure on gold temporarily. Still, the underlying trends—geopolitical fragmentation, efforts to move away from the dollar, and inflation risks—make it unlikely these challenges will alter gold’s positive long-term trajectory.

Final Thoughts: Preparing for a Gold-Driven Era

The intersection of rising geopolitical risk and central bank buying has transformed gold’s function in the world’s financial system. For investors aiming to safeguard their wealth against systemic shocks, GLD offers a robust route to diversification. With central banks helping stabilize gold prices and supply growth remaining constrained, the strategic case for holding GLD is stronger than ever. In today’s unpredictable economic climate, gold—and, by extension, GLD—continues to be a reliable store of value.