Central Bank Hoarding Sets A 'Structural Floor' For Gold

The gold market's sharp March drop, down 12% to roughly $4,690 was, was the worst monthly decline since 2008. It was alarming at first glance, but it didn't deter the relentless, one-directional accumulation by BRICS+ nations.

The latest study by EBC Financial Group notes that the bloc now controls more than 6,000 tons of gold, or 17.4% of global reserves. It is a big jump from 11.2% it had in 2019. Gold has become a "sovereign shield," protecting nations from sanctions risk and the declining influence of the U.S. dollar.

"This is not speculative demand, it is policy," EBC analyst Michael Harris noted, according to KITCO.

Buying on Weakness

Gold's March weakness was multi-pronged. An energy shock renewed inflation fears, erasing the Fed's rate-cut expectations. Meanwhile, it put pressure on the market to trim the winners to support other positions. Retail leverage just contributed to the cause. According to the Atlantic Council, retail market borrowing has reached a record $1.2 trillion by the end of last year. 

Forced deleveraging is, by definition, systematic. When portfolios get overstretched, liquidation doesn't discriminate.

Yet, per Bloomberg, while markets sold off, China's central bank extended its gold buying streak to 17 consecutive months, adding roughly 5 tons.

This divergence highlights what Harris calls a "structural floor" in the market. Central banks are now absorbing about 20% of annual mine supply, creating consistent demand that cushions price declines.

"The buying has been one-directional and price-insensitive, meaning sovereign purchasers absorb supply regardless of whether gold trades at $4,000 or $5,000," Harris noted.

For these buyers, the priority is not timing the market; it is securing physical reserves in domestic vaults.

The Saudi Wild Card

At the same time, the dollar's dominance is slowly eroding. IMF data shows its share of global reserves has fallen to 57%—a 30-year low. Meanwhile, the 2025 World Gold Council survey showed that 73% of central bankers expect it to remain lower over the next five years.

For Harris, this decline isn't driven by active selling, but by faster growth in alternatives, especially gold. The BRICS+ bloc, led by Russia and China (who together hold roughly 74% of its gold), has effectively created a blueprint that others are now following.

Additionally, he sees Saudi Arabia as a potential "wild card." The Kingdom has allocated just 2.6% of its reserves to gold.

"A move to just 5% gold allocation would require purchases equivalent to the entire projected central bank demand for 2026 from a single buyer," Harris wrote.

Such a shift would dramatically tighten global supply, further solidifying the support for gold—regardless of short-term headwinds.

Price Watch: SPDR Gold Trust (NYSE:GLD) is up 8.42% year-to-date.

Photo by Dodi Dharmanto via Shutterstock