“Central Banks are not very good long term investors.” -Jeffrey Gundlach, the “Bond God,” June 17, 2025
“Gold has become the de facto reserve currency.” -Nassim Taleb, June 11, 2025.
It might be the worst gold deal of all time.
As the head of United Kingdom’s Treasury, Gordon Brown infamously sold off over half of the UK’s gold between 1999 and 2002 at an average price of $275/ounce. This sale earned the UK $3.5 billion… but that gold would be worth over $35 billion today. Even considering inflation, it was a brutally bad decision.
Brown wasn’t alone. Between 1990 and 2008, central banks sold off thousands of tonnes of gold at rock bottom prices (mostly between $400-$800). They only started buying gold again on net in 2009, when the price had risen to all time dollar denominated highs of over $1,000/oz.
Since then, it appears that central banks prefer to buy gold at higher prices. In 2022, after years of central banks buying 500 tonnes annually, the scales tipped to over 1,000 tonnes – a record amount of gold purchases.
The rush to gold came on the heels of Russia’s war with Ukraine – and the subsequent freezing of Russian assets denominated in dollars and euros.
The message for everyone else: if you have your reserves in dollars or euros, there’s a chance the US and the Euro-zone may freeze them at any time for any reason.
In short, you’d be better off owning gold.
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It’s likely the case that Gordon Brown did not prefer to sell the UK’s gold at record low prices, and that central bankers do not prefer to buy gold near record high prices today either.
But they’re being forced to deleverage from their dollar positions.
That’s not just because of the threat of getting unbanked by the US…
And it’s not just because the dollar is growing increasingly impaired with massive debts, growing deficits and untenable interest rate expense…
It’s also because for the past 20+ years, the US has been the beneficiary of a flood of foreign investment to the tune of over $25 trillion. You’ve likely heard of the yen carry trade (where investors borrow in yen, buy US assets and then profit when the yen devalues against the dollar).
But it wasn’t just the yen. Foreign investors have been overweight US assets for years. Despite making up less than 30% of global GDP, the valuation of US stocks makes up over 60% of global investment. That trend is now unwinding.
Besides their own currencies, foreign investors have very few options.
And the only real choice is gold.
The share of global reserves moving into gold is moving directly opposite the share of dollars.
And a recent survey of central banks conducted by the World Gold Council signals that gold buying and dollar deleveraging are both likely to continue.
As reported by the Financial Times yesterday, “A record 95 per cent of respondents to a World Gold Council survey expect global central banks’ gold holdings to increase over the next 12 months, the highest level since the annual poll started in 2018. Meanwhile three-quarters of respondents expect central banks’ US dollar holdings to decline over the next five years. More than 70 central banks responded to the industry body’s survey.”
The grand illusion of the last 50+ years of global monetary policy is dissolving away like fog in the sun. Only gold is a truly stable backing for global currencies. And every central bank is rapidly reaching that conclusion all at once.
It’s just beginning.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst, Golden Portfolio
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