Gold is the New Treasury? A Shift in the World’s Safe Haven

Hello readers!

Last week, something unusual happened in the quiet world of central banking. For the first time in almost 30 years, the value of gold held by central banks became greater than the value of US Treasuries they own.

Think of it like this: imagine your grandmother’s jewellery box suddenly being worth more than the fixed deposit she’s been bragging about for years. That’s what just happened on a global scale. And it could change the way we think about money.

Why Treasuries Were Always the Favorite

For decades, US government bonds or Treasuries have been seen as one of the safest places to store money. The reason is simple. The US government is considered the ultimate borrower. Unlike households or companies, it cannot technically go bankrupt, because it can always raise taxes or print dollars to pay back its loans.

Treasuries are also easy to buy and sell. The market is huge, around $29 trillion, and highly liquid. That means central banks can trade them quickly when they need to. Plus, Treasuries pay interest, unlike cash lying idle.

Gold: The Old Favorite

Gold, on the other hand, has always been the sentimental option. It has history, it shines in vaults, and it feels safe. But it has one big drawback: it does not pay interest. It also costs money to store. That is why central bankers were never as excited about adding too much of it to their reserves in the past.

But in recent years, this has changed.

What Changed Recently?

The price of gold has gone up sharply. In 2024, gold was around $2,000 an ounce. Today, it is close to $3,400. That means the gold central banks have already become significantly more valuable without them taking any action.

Additionally, they have been purchasing more. In 2024 alone, central banks bought over 1,000 tonnes of gold. In just the first six months of 2025, they added another 410 tonnes. That shows a clear commitment.

Meanwhile, US Treasuries have started to look less attractive.

The Dollar Problem

The issue comes down to the US dollar itself. Since 2020, the dollar has lost about 30% of its value because of inflation. For example, if a chocolate bar cost $1 in 2020, today it costs around $1.30. That’s what inflation does: it reduces purchasing power.

Treasuries currently give about 4% returns. But if inflation is 3%, the real return is only 1%. And if inflation goes higher than 4%, investors actually lose money.

In fact, history shows that the dollar has lost value at about 4% a year since 1971, when the US left the gold standard. A dollar from 1971 today has the same buying power as nearly $8. Economists call this “debasement”, when money loses value because supply grows faster than the economy.

Trust Issues

Another factor is politics. In 2022, when the West froze Russia’s reserves, many central banks realised that Treasuries, for all their stability, could still be vulnerable to political decisions. Gold, by contrast, is simple. If a central bank keeps bars of gold in its own vault, nobody can freeze them. It is an asset you truly own.

History Repeats Itself

This situation is not entirely new. In the 1970s, after the US moved away from gold, inflation soared into double digits. Treasuries gave negative real returns, while gold prices shot up from $35 an ounce to nearly $850 by 1980. Central banks then shifted towards gold, too.

Today is not the same: the dollar still makes up nearly 60% of global reserves, and inflation is not as extreme. But the pattern is familiar: when debt is heavy and trust is shaky, gold comes back into fashion.

Treasuries vs. Gold: A Balance

This does not mean the dollar or Treasuries are disappearing. They are still needed to buy oil, settle trade, and issue bonds. Treasuries remain valuable for liquidity. But gold offers sovereignty, the sense of owning something outright. Together, they balance a reserve portfolio.

India has already moved in this direction. The Reserve Bank of India recently brought back over 100 tonnes of gold from overseas vaults. Today, gold makes up about 12% of India’s reserves. In a world of tariffs and sanctions, it makes sense for central banks to keep some of their “insurance” close at home.

What It Means for the Rest of Us

For ordinary people, the shift has a few consequences. First, gold prices may stay high because when central banks buy and don’t sell, supply gets locked away. That puts a floor under prices.

For the US, the change means it may have to pay a bit more interest when issuing debt. And when you are borrowing in the tens of trillions, even a small increase adds up to billions of dollars in extra costs.

The irony is clear. Central banks keep the system running by creating money. Yet they seem more comfortable storing a portion of that money in gold. It’s as if the guardians of money are hedging against money itself.

Conclusion

Gold has quietly stepped back into the spotlight. For decades, Treasuries ruled as the world’s safest financial anchor. But rising inflation, political risks, and the sheer weight of US debt have nudged central banks to rebalance. By leaning on gold, they are signaling that trust in paper money is not absolute.

This shift does not end the dollar’s dominance, nor does it make Treasuries irrelevant. Instead, it shows that even the biggest players in the financial world feel safer holding a timeless asset alongside modern instruments. And maybe that is the bigger story: money may change with time, but the instinct to seek security never does.

📅  Coming up next week!

September 15 (Monday)

India’s Trade Deficit: India’s merchandise trade deficit widened to $27.35 billion in July, the highest since the record $37.87 billion in November 2024 (which will likely be revised lower). Merchandise exports stood at $37.24 billion during the same period. Export-oriented industries have started facing pressure as the US imposed 25% tariffs in early August. The trade numbers for August are expected soon.

Unemployment Rate: India’s unemployment rate dropped to 5.2% in July, down from 5.6% in June, marking the lowest since April’s 5.1% record low. This indicates strong economic activity in July, before the US tariffs came into play.

September 16 (Tuesday)

Euro Pratik Sales IPO: Euro Pratik Sales, a company engaged in selling and marketing decorative wall panels and laminates, is launching its first-ever public issue. The price band is set at ₹235–₹247 per share.

• Issue closes: September 18
• Allotment date: September 19
• Listing date: September 23

Eurozone Economic Sentiment: The ZEW Indicator of Economic Sentiment for the Euro Area fell by 11 points to 25.1 in August, below expectations of 28.1. At the same time, the current economic situation index slipped by 7 points to -31.2. The September reading will be released on Tuesday.

September 17 (Wednesday)

US Fed Interest Rate Decision: The US Federal Reserve recently kept rates unchanged at 4.25%–4.50% for the fifth consecutive meeting, as expected. However, two governors pushed for a rate cut. The Fed adopted a wait-and-watch approach, highlighting concerns that the ongoing tariff war may impact its 2% inflation target. The central bank said future rate moves will depend on incoming data, economic outlook, and risks.

VMS TMT IPO Launch: Gujarat-based steel bars manufacturer VMS TMT is coming out with its IPO on September 17. The offering is a fresh issue of 1.5 crore equity shares, meaning all proceeds will go directly to the company.

• Allotment date: September 22
• Listing date: September 24

September 18 (Thursday)

Bank of England (BoE) Rate Decision: The BoE previously cut interest rates by 25 bps to 4%, the lowest since March 2023. Interestingly, it took two rounds of voting to reach this decision — a first in BoE history. The split showed differences between tackling rising inflation (expected to peak at 4% in September) and addressing labour market pressures caused by higher payroll taxes and minimum wage increases. The next decision is due Thursday.

US Jobless Claims: US initial jobless claims rose by 27,000 in the first week of September, reaching 263,000, the highest since October 2021. This was well above market expectations of 235,000, confirming weakness seen in recent labour market surveys. The next data, covering the week ending September 13, will be released on Thursday.

September 19 (Friday)

Bank of Japan (BoJ) Rate Decision: The BoJ kept interest rates steady at 0.5% in July, the highest since 2008. This decision, taken unanimously, shows the bank’s cautious stance on policy normalisation. The announcement came just hours after the US Fed also left rates unchanged for the fifth straight meeting, despite pressure from President Donald Trump to cut rates.

🎥 Prime Wealth Finserv In Media

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Chakravarthy V and Chakrivardhan Kuppala wrote for Business Today:

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