Central Banks Diversify Gold Reserves to Mitigate Political Risk

Central banks are increasingly diversifying their gold reserves across multiple jurisdictions to mitigate political and legal risks. According to an analysis by Goldman Sachs, reserve managers are spreading holdings to avoid the risk of frozen assets, a trend that accelerated following the 2022 freezing of Russian reserves.

Despite this shift, the Bank of England remains the most widely used foreign custodian, serving 57% of surveyed central banks, while the Federal Reserve Bank of New York ranks second at 14%. London and New York continue to be preferred hubs because of their liquidity and integration with settlement networks.

Demand for the metal remains high, with central banks purchasing an estimated 57 tonnes of gold in June. The Government of China emerged as the largest identifiable buyer during that month, purchasing 40 tonnes, while also seeking to establish itself as an alternative custody center. Goldman Sachs forecasts that gold will reach $4,900 per ounce by the end of 2026, driven by projected monthly central-bank purchases averaging 50 tonnes this year.