Gold remains one of 2025’s top-performing assets to date, with a year-over-year gain of nearly 40%. The reasons underlying both gold demand and its stellar rise are well known, with geopolitical worries, tariff concerns and persistent inflation three of the most frequently cited reasons.
But if gold investors need another reason to maintain a bullish posture on the yellow metal, a chart recently circulating around the Internet provides it. As shown below, foreign central banks now hold more gold than they do U.S. Treasuries as a percentage of international reserves than at any time since 1996.
Source: Financial Times
Commenting on this development, the Financial Times in a recent article asked rhetorically, “Could this signal an inflection point for the post-Bretton Woods world?” This, of course, is a reference to the post-World War II international monetary system which pegged major currencies to the U.S. dollar and which was, in turn, convertible to gold.
Indeed, central banks worldwide are purchasing gold at a solid pace this year, continuing a trend that began in 2009 (when their collective gold holdings bottomed out). Specifically, the bank buying trend underlines a move out of dollar-denominated assets and into bullion, which in part is a desire to “de-risk” from U.S. military, trade and economic policies that many countries regard as unsettling.
Moreover, according to Reuters, “Central banks worldwide are on track to buy 1,000 metric tons of gold in 2025, which would be their fourth year of massive purchases as they diversify reserves from dollar-denominated assets into bullion.”
It was further noted that central banks account for almost one-fourth of total demand and are the third largest category of gold consumption after the jewelry sector and physical investment.
Central bank buying isn’t the only major demand catalyst for gold, however. Indeed, a case can be made that, aside from its obviously inflationary implications, today’s runaway bull market in gold is as much a reflection of global credit risk as anything else.
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Last week’s political upheaval in France, following the ouster of its prime minister, has raised fresh concerns in the mainstream press about the stability of the government and its potential implications for France’s sovereign debt. Not to be outdone, gold prices also clearly benefited from the flight to safety by reaching another record in the wake of the crisis.
However, it’s not just France that’s currently experiencing sovereign credit problems. As of 2025, more countries than the historical norm are experiencing credit pressures, with 20 nations said to be in sovereign debt distress so far this year—a multi-decade high (though not as concentrated as the 1980s Latin American debt crisis).
Sub-Saharan Africa accounts for the largest share of the debt distress (including Angola, Ghana, Kenya, Ethiopia and Zambia). Meanwhile, Latin America takes up 25% of the credit crisis pie (mainly Argentina, Ecuador and El Salvador), with the Middle East & North Africa accounting for 15% and Europe and Asia bringing up the rear at 10% apiece.
Along those lines, with growing debt and economic distress around the world, protest and unrest activity is climbing. As of year-end 2024, for instance, the ACLED Conflict Index (a global assessment of how and where conflicts in every country and territory in the world vary by deadliness and danger to civilians) showed a 25% increase in political-violence incidents over a 12-month period as of the end of 2024.
What’s more, experts predict a further acceleration of political violence for 2025. (More precisely, ACLED estimates that for 2025, activity will be more than three times the 2009 level—and well above historical averages—as reflected in the following chart.)
In summary, the increasing possibility for a credit event in any of the aforementioned parts of the world, along with the growing problem of rising global protest, political violence and unrest activity—which can easily serve as a catalyst for new wars, or for the acceleration of existing ones—is clearly higher than it has been in several years. These are additional reasons, in my estimation, why holding gold/silver and precious metals mining stocks is a good idea for investors who want to hedge against geopolitical and global market uncertainty.
While we’re on the subject of precious metals, the continued strength in the price of gold has clearly benefited one the holdings in the Cabot Turnaround Letter portfolio, namely, Agnico Eagle Mines (AEM), which just hit a lifetime high. On that score, I’m happy to announce that my top stock pick for 2025 (namely, Agnico) placed among the top 10 for the year to date in the MoneyShow The Best of the Best report. To obtain your complimentary copy of the Top 10 picks report, visit this link.
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