Gold Hits Record Highs: Can the Global Central Bank Buying Spree Continue? A Battle Between Safe-Haven Demand and De-Dollarization

International gold prices have once again hit record highs, with the sustained large-scale gold purchases by global central banks over the past several years becoming a focal point for markets. Against the backdrop of safe-haven demand and de-dollarization trends, whether this multi-year buying spree can continue is a hot topic among derivatives market investors.

The Central Bank Presence Behind Record Gold Prices

According to the World Gold Council, global central banks have maintained net gold purchases for several consecutive years, with annual purchases exceeding 1,000 tonnes in both 2023 and 2024, setting historical records. Entering 2025, this trend has not weakened, with many central banks continuing to increase their gold reserves early in the year. Meanwhile, international gold prices have repeatedly broken through historical highs in the first quarter of 2025, as market risk aversion and central bank buying have reinforced each other.

Analysts point out that central bank gold purchases have evolved from simple asset allocation to a strategic move to diversify foreign exchange reserves. Central banks in emerging market countries such as China, India, Turkey, and Poland are continuously increasing the share of gold in their foreign exchange reserves. This structural change provides significant long-term support for gold prices and cannot be overlooked.

Safe-Haven Demand: Dual Drivers from Geopolitics and Market Volatility

The current global geopolitical landscape remains complex. Trade frictions between major economies, regional conflicts, and high volatility in financial markets have collectively boosted the appeal of safe-haven assets. Gold, as a traditional safe-haven tool, tends to attract capital during periods of heightened uncertainty.

In the derivatives market, implied volatility for gold options and futures has recently risen, with a notable increase in open interest for call options, reflecting investor expectations of further upside in gold prices. According to CME data, open interest in gold futures remains at historically high levels, indicating strong market participation.

De-Dollarization: Long-Term Structural Support

The de-dollarization trend is another important driver behind the central bank gold buying spree. In recent years, many countries have gradually reduced their reliance on the US dollar in cross-border trade settlement and foreign exchange reserve allocation. According to IMF data, the dollar's share of global foreign exchange reserves has fallen from over 70% at the beginning of this century to below 60% currently, while gold's reserve share has steadily increased.

This trend has sparked more discussion after Bitcoin broke above $100,000 in 2024. Some market views suggest that non-dollar assets, including gold and Bitcoin, are becoming important options for diversifying the global monetary system. However, gold remains the preferred choice for central banks due to its low volatility and long-term store of value.

Can the Buying Spree Continue? Signals from Derivatives Markets

There are differing views on the sustainability of the central bank gold buying spree. Optimists argue that amid the broader de-dollarization trend and prolonged geopolitical risks, central banks' motivation to increase gold holdings remains strong, and the buying spree is unlikely to reverse at least in the coming years.

Cautious voices point out that record-high gold prices may dampen the pace of purchases by some central banks, especially those with limited foreign exchange reserves. Additionally, if global inflation falls significantly and real interest rates continue to rise, the opportunity cost of holding gold will increase, potentially diminishing its appeal.

From the derivatives market perspective, the gold forward curve still shows a mild contango structure, indicating positive expectations for medium- and long-term gold prices. Meanwhile, risk reversal indicators for gold options show that call option demand is slightly dominant, but there is no extreme one-sided positioning, suggesting that the market is wary of a potential pullback from current highs.

Conclusion: The Battle Continues

In summary, the sustainability of the global central bank gold buying spree depends on the outcome of the tug-of-war between safe-haven demand and de-dollarization trends. In the short term, gold prices may experience heightened volatility at high levels, but medium- and long-term structural support factors remain intact. For derivatives investors, monitoring central bank gold purchase dynamics, geopolitical developments, and dollar movements will be key to seizing opportunities in the gold market.