Central banks continue to turn to physical gold
Something significant has been happening in the global financial system for more than a decade.
Central banks around the world have been steadily increasing their gold reserves, and despite gold reaching record prices, official sector demand remains historically strong.
According to the World Gold Council, central banks purchased 863 tonnes of gold in 2025. While this was below the exceptional levels above 1,000 tonnes recorded in each of the previous three years, it remained well above the 2010–2021 annual average of 473 tonnes.
The trend has continued into 2026.
During the first half of 2026, reported central bank purchases remained substantial, with Poland, Uzbekistan, China and Kazakhstan among the leading buyers. The World Gold Council reported 345 tonnes of net central bank demand during H1 2026, with Poland the largest buyer at 82 tonnes.
For anyone who owns physical gold, the important point is not simply how many tonnes central banks buy in any particular month. It is the longer-term change in how governments are treating gold as part of their reserves.
Why are central banks buying gold?
Central banks manage enormous reserves and have traditionally relied heavily on currencies and government bonds.
Gold is different.
Physical gold is not another country’s liability. It does not require a government, bank or company to honour a promise to pay. It is a tangible reserve asset that can be held directly by the institution that owns it.
The World Gold Council’s 2026 Central Bank Gold Reserves Survey found that central banks have accumulated an average of around 1,000 tonnes of gold per year over the past four years, approximately double the average pace of the preceding decade. The survey identified geopolitical and economic uncertainty as important factors behind this increased focus on gold.
Several factors help explain the continued demand.
1. Diversification of reserves
Central banks do not want all of their reserves concentrated in a single currency or asset class.
Gold provides another reserve asset outside the traditional foreign-exchange system.
2. No traditional counterparty risk
A government bond represents a liability of the issuer. A bank deposit depends on the banking system.
Physical gold is different. Once owned and securely stored, the bullion itself does not depend on another party making a payment.
3. Geopolitical uncertainty
The global financial system has become increasingly fragmented.
Trade disputes, sanctions, changing alliances and concerns about access to international financial infrastructure have encouraged some central banks to reconsider the composition of their reserves.
Gold can be held domestically and does not depend on a foreign government continuing to honour a financial obligation.
4. Long-term purchasing power
Gold has been used as money and a store of value across thousands of years and remains part of the reserves of central banks around the world.
The World Gold Council notes that central banks collectively hold roughly one-fifth of all the gold ever mined.
For reserve managers, gold is therefore not simply a commodity. It is a strategic financial asset.
Which central banks are buying?
Poland has been particularly active.
The National Bank of Poland added 102 tonnes during 2025, taking its holdings to approximately 550 tonnes. During H1 2026, Poland added another 82 tonnes, according to the World Gold Council.
China has also continued increasing its official gold holdings.
The People’s Bank of China added 27 tonnes during 2025, taking reported reserves to approximately 2,306 tonnes. It then added a further 7 tonnes during Q1 2026. By H1 2026, China’s reported purchases for the year had reached approximately 40 tonnes.
Uzbekistan and Kazakhstan have also been significant buyers.
This is important because the buying is not confined to one country or one region. Central bank demand has been geographically diverse, particularly among emerging-market institutions.
Central banks are buying even when gold is expensive
One of the most interesting aspects of the current cycle is that central banks have continued buying despite historically high gold prices.
The World Gold Council reported that gold demand reached a record 5,002 tonnes in 2025, while the average annual gold price reached approximately US$3,431 per ounce. Bar and coin investment also reached a 12-year high of 1,374 tonnes.
This suggests that central banks are not necessarily approaching gold as a short-term trade.
Instead, their purchasing appears to form part of longer-term reserve management strategies.
The World Gold Council’s 2026 survey also found that central banks remain committed to gold, with the average pace of accumulation over recent years significantly above the previous decade’s average.
What does this mean for Australian investors?
Central banks operate on a completely different scale from individuals, but the underlying principle is worth understanding.
They are not buying gold because they expect to become rich overnight.
They are holding gold because it provides a physical asset outside the liabilities of another institution.
For Australian investors, physical gold and silver can similarly form part of a diversified approach to wealth preservation.
Owning physical bullion means owning an asset directly rather than simply owning a financial contract linked to the price of gold or silver.
At FirstGold, we believe this distinction matters.
Physical bullion is different from paper exposure
There are many ways to gain exposure to the precious metals market, including ETFs, futures, shares and other financial products.
Physical bullion is different because the investor owns the actual metal.
For those looking at physical precious metals, gold, silver and platinum can provide different characteristics and should be considered according to individual circumstances, objectives and risk tolerance.
The key is understanding what you actually own.
Physical gold is a tangible asset.
It does not require an app, exchange, fund manager or financial institution to remain valuable.
That does not mean the price cannot fall. Gold and silver prices fluctuate, sometimes substantially. But the physical metal itself remains in existence regardless of the short-term market price.
Central banks are sending a long-term message
Central bank buying should not be interpreted as a guarantee that gold prices will rise.
Markets can move in both directions, and central banks themselves sometimes sell gold.
However, the sustained accumulation of bullion by official institutions provides an important insight into how some of the world’s largest reserve managers view gold.
The World Gold Council’s latest data shows that central bank demand remains historically elevated, even after the exceptional buying levels of recent years.
For private investors, that raises a straightforward question:
If governments are continuing to increase their physical gold reserves, should individuals consider whether they have any physical bullion of their own?
At FirstGold, we believe building physical bullion holdings does not have to happen all at once.
You can start small and build over time.
Whether you are buying gold or silver, the objective is not necessarily to predict tomorrow’s price.
It can simply be about gradually building ownership of a tangible asset that has been recognised as money and a store of value for thousands of years.
Build wealth one gram at a time.
FirstGold — Physical Gold & Silver
Disclaimer: This article is general information only and does not constitute financial advice. Precious metals prices can rise and fall, and investors should consider their own circumstances and seek professional advice where appropriate.
