The World Gold Council said on the 12th that net gold purchases (288.9t) by Central Banks around the world in the second quarter jumped to 4.1 times the first quarter (56.5t). Over the same period, net gold purchases by the super rich (ultra-high net worth individuals) also rose 34%, from 243.7t to 327.1t.
U.S. Government Bonds, by contrast, have lost favor. As worries grow over widening fiscal deficits, yields on U.S. Government Bonds are soaring to record highs. Experts said, "Gold is overtaking U.S. Government Bonds in the global safe-asset rankings, and that trend is likely to continue for the time being."
◇ Among the aggregates of Central Banks' foreign exchange reserves worldwide: "gold 27% > U.S. Government Bonds 22%"
Central Banks are not only buying physical gold but also dipping into related investment products. The Bank of Korea invested $250 million (about 350 billion won) in overseas-listed gold exchange-traded funds (ETFs) in the second quarter of this year. It was the first purchase of gold-related asset since 2013.
In August alone, there was a net inflow of $18 billion into global gold exchange-traded funds (ETFs), according to tallies. It was the second largest on record on a monthly basis. In the same month, gold returned 13%, the highest since December 2025 (14%). That translated into $4,563 per ounce (oz). This return is also the third highest in the past 25 years.
Gold prices have also been climbing recently. Based on the London Bullion Market Association (LBMA), the spot gold price was $4,409.9 per troy ounce (31.1g) at the end of August, up 8.23% from the end of July ($4,073.9).
◇ "Gold storage facilities are at capacity" "Not the U.S. Government Bonds of old"
Gold's share (27% as of the end of last year) of the aggregates of foreign exchange reserves held by Central Banks worldwide has already surpassed the share of U.S. Government Bonds (22%).
Analysts say the reason U.S. Government Bonds have lost appeal is the U.S. government's massive fiscal deficits. Total federal debt rose by $2.8 trillion over the past year. Excluding the COVID-19 pandemic period, that is the fastest pace.
As doubts grow over whether the government can repay its debt, more investors are demanding additional yield that reflects a "risk premium." The safe-asset character of U.S. Government Bonds is fading.
The Financial Times (FT) also reported in March, "The United States is increasingly seen as a less reliable partner than before. U.S. Government Bonds are not what they used to be." The report also said that one gold storage facility in London, England, had reached capacity, forcing an expansion as gold demand surged.
There has also been a synchronization in which U.S. Government Bonds move in the same direction as risky assets like stocks. In the past, when stock prices fell, Government Bonds would rise, providing a hedge. Since COVID-19, however, the two asset prices have tended to move in the same direction. That has made it difficult to achieve diversification with Government Bonds.
BlackRock, the world's largest asset manager, also said, "Since 2020, the correlation (synchronization) between stocks and bonds has increased," adding, "The traditional role of bonds as an effective diversification tool is being called into question."