Central Banks Hoarding Gold: Is This Asian Official Right About Selling Now?

The global financial landscape is witnessing a fascinating trend: central banks are accumulating gold at a pace not seen in decades. In the first half of 2025, central banks globally increased their gold reserves by 415.1 tons. This surge in demand has propelled gold prices to record highs, with some analysts predicting further increases. But amidst this gold rush, a dissenting voice has emerged from Asia, questioning whether this hoarding is a wise strategy. Benjamin Diokno, a Monetary Board member and former governor of the Philippines’ central bank, has suggested that the Philippines might want to consider selling some of its gold reserves, which constitute about 13% of the country’s gross international reserves. This raises a critical question: Is it time for some central banks to take profits, or should they continue to accumulate the precious metal?

The Global Gold Rush: Why Central Banks Are Hoarding Gold

Central banks are the financial institutions responsible for overseeing and managing a country’s monetary system and financial stability. They play a crucial role in a nation’s economy, and their actions can significantly impact the price of gold. Several factors are driving this trend:

De-dollarization: Many emerging markets, including China, India, Russia, and Turkey, are actively seeking to reduce their reliance on the US dollar. Gold offers insulation from sanctions, strengthens monetary credibility, enhances financial stability, and provides flexibility for independent monetary policy in an increasingly multipolar financial order.
Safe-Haven Asset: In a world of geopolitical realignments, unpredictable bond yields, and uneven economic growth, gold is once again being treated as the ultimate store of value. It carries no counterparty risk, meaning it cannot default, be debased by inflation, or be frozen by sanctions.
Diversification: Central banks use gold to diversify their reserves beyond paper currencies. Holding a mix of assets, including gold, helps central banks spread risk and reduce dependence on a single currency or asset class.
Inflation Hedge: Gold is considered a hedge against inflation, currency fluctuations, and financial uncertainty. Central banks hold gold to preserve their reserves’ real value, especially during economic uncertainty or currency depreciation.
Geopolitical Insurance: Central banks may increase their gold holdings during times of economic and geopolitical uncertainty. Gold is considered a safe-haven asset, and its value tends to rise during crises. Central banks acquire gold as a hedge against financial instability, trade disputes, or political conflicts.

The World Gold Council’s Central Bank Gold Reserves Survey 2025 reveals that 76% of central banks expect to hold a higher proportion of gold five years from now, while 73% expect the US dollar’s share in global reserves to decline. This persistent official buying has created a structural floor under gold prices, even amid higher global interest rates.

The Case for Selling: An Asian Perspective

Benjamin Diokno’s suggestion that the Philippines consider selling some of its gold reserves is rooted in the idea of portfolio optimization. Diokno argues that the Philippines’ gold holdings are already excessive, comprising about 13% of the country’s $109 billion in gross international reserves, a larger share than most of its Asian peers. He believes that a ratio closer to 8% to 12% would be more ideal.

Diokno’s comments highlight an internal debate at the central bank over whether to keep accumulating gold or start taking profits. In 2024, the central bank sold some of its gold holdings before prices surged, drawing criticism. The central bank has said it actively manages its reserves, including gold, to meet the Philippines’ foreign exchange requirements.

Several factors support Diokno’s perspective:

Profit-Taking: The Philippines built up its gold holdings when gold traded around $2,000 per troy ounce. With prices having more than doubled since then, selling some gold could generate substantial profits.
Risk Management: Diokno questions what will happen if the price of gold goes down. Selling some gold now could mitigate potential losses if prices decline.
Opportunity Cost: Holding a large portion of reserves in gold may limit the central bank’s ability to invest in other assets that could generate higher returns.

The Counterargument: Why Central Banks May Continue to Hoard

Despite Diokno’s concerns, many analysts believe that central banks will continue to accumulate gold. Several factors support this view:

Long-Term Value: Gold has historically maintained its value over centuries, unlike paper currencies, which can be subject to inflation or devaluation. Central banks hold gold to preserve their reserves’ real value, especially during economic uncertainty or currency depreciation.
Geopolitical Uncertainty: The world remains a volatile place, with ongoing geopolitical tensions and economic uncertainties. In this environment, gold is likely to remain a safe-haven asset.
De-dollarization Trend: The trend of emerging markets seeking to reduce their reliance on the US dollar is likely to continue, further supporting demand for gold.
Digital Currency Concerns: As more countries explore central bank digital currencies (CBDCs), gold may become an even more attractive hedge against the risks associated with digital monetary systems.

The Impact on Gold Prices

Central bank buying and selling can significantly impact gold prices. Because the amounts of gold they buy can be large, they can significantly affect the active supply of gold available for purchase. Basic economics dictates that a decrease in supply, absent a concurrent drop in demand, results in a price increase.

Analysts at Morgan Stanley expect the rally to continue into 2026, projecting prices could touch $4,900 per ounce next year. Goldman Sachs has described this as the “debasement trade,” in which both gold and bitcoin gain favor when investors lose faith in traditional currencies.

However, not everyone is convinced. Capital Economics predicts that the price of gold will fall to $3,500 an ounce by the end of 2026 as the precious metal heads toward a “mini-bust.”

The Bottom Line

The question of whether central banks should continue hoarding gold or start selling is complex and depends on each country’s specific circumstances and investment objectives. While profit-taking and risk management are valid considerations, the long-term value of gold as a safe-haven asset and a hedge against geopolitical and economic uncertainties suggests that central banks will likely continue to accumulate the precious metal.

For investors, monitoring central bank activity is crucial, but successful gold investing requires considering multiple factors like inflation, interest rates, and geopolitical events.

Advice

Diversify Your Portfolio: Don’t put all your eggs in one basket. Diversify your investments across different asset classes, including stocks, bonds, and commodities like gold and silver.
Consider a Gold ETF: A gold exchange-traded fund (ETF) is a convenient way to invest in gold without physically owning the metal.
Stay Informed: Keep up-to-date on the latest news and trends in the gold market.
Consult a Financial Advisor: Seek professional advice from a qualified financial advisor before making any investment decisions.

Disclaimer: This is not financial advice. Please consult with a financial professional before making any investment decisions.