Is Now the Time to Invest in Gold Like Central Banks Are Doing?

For years, many seasoned investors – including those inspired by Warren Buffett – have steered clear of gold. Buffett once famously dismissed gold, saying it “has no utility” and “just sits there,” generating no income, dividends, or productivity. This view made perfect sense when the U.S. dollar stood tall as the unchallenged global reserve currency.

But today’s economic and geopolitical climate is forcing even long-time skeptics to reconsider.

The Changing Role of Gold in a Shifting Global Order

Gold has historically played multiple roles: as currency, a store of value, and a hedge against uncertainty. From being a foundation of global finance under the 1944 Bretton Woods agreement to losing its dollar peg in 1971, gold has constantly evolved with the financial system.

In that old structure, the U.S. dollar was backed by gold, and other global currencies were tied to the dollar. This gave the international monetary system a sense of stability. However, since the dollar-to-gold link was severed in 1971, fiat currencies have operated without any backing from tangible assets like gold.

Yet, recent events — including currency fluctuations, rising inflation, banking vulnerabilities, and growing distrust in global financial institutions — have once again highlighted gold’s enduring appeal. Many central banks around the world are now increasing their gold reserves, signaling a desire to hedge against financial instability and over-reliance on the dollar.

Why Central Banks Are Buying Gold — and What That Means for You

Central banks have been quietly (and consistently) accumulating gold over the past several years — not for profit, but for stability. These large institutions understand that gold remains one of the few assets with no counterparty risk and universal acceptance. With global tensions rising and traditional markets growing more volatile, gold serves as a hedge against unpredictable macroeconomic shocks.

So, what does this mean for individual investors?

It might be time to rethink gold as more than just a “non-productive” asset. While it may not generate income like stocks or real estate, gold can serve as an effective long-term hedge — especially during times of crisis, currency devaluation, or economic slowdowns.

A Balanced View on Gold Investment

Gold shouldn’t necessarily dominate your portfolio, but having a small allocation can offer protection during turbulent times. Whether you invest in physical gold (like coins and bars), gold ETFs, or even sovereign gold bonds, the goal is to provide diversification and reduce risk — not chase returns.

With central banks leading the charge, perhaps gold is no longer just a “relic of the past,” but a relevant asset for navigating the future.

Source: Inspired by Dhirendra Kumar’s article in Economic Times – “Gold investment: Should you start investing in gold like the central banks as global financial order shifts?”, published April 7, 2025.