Gold in a Time When Paper Loses Value
In a digital world where money is created with a click of a keyboard, it seems unbelievable that the largest financial institutions still buy something as old-fashioned as gold.
And yet, in recent years central banks have purchased more gold than at any time since 1967.
- Why? Because history shows: paper currencies collapse, empires fall, financial systems change – but gold remains.
Record Purchases: When the Dollar Shakes
In 2023, central banks bought 1,136 tons of gold — the most in more than half a century.
- This was a response to several parallel crises:
- inflation that reached 40-year highs after the pandemic,
- the war in Ukraine, which showed that sanctions can exclude a country from the global SWIFT payment system,
- tensions between China and the United States,
- the collapse of major companies (Evergrande in China, Silicon Valley Bank in the U.S.).
- When banks and companies collapse, paper stocks and bonds can become worthless. Gold remains.
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Henry Kissinger summarized it in 1973:
“Who controls food controls the people. Who controls energy controls nations. Who controls gold controls money.”
China: Gold as a Shield Against the Dollar and Evergrande
China’s central bank (PBoC) has increased its reserves by more than 70% since 2018. Officially it holds around 2,300 tons, but unofficial estimates suggest more than 4,000 tons.
Why are they buying?
Dependence on the dollar: Chinese exports rely on the U.S. currency. If the U.S. blocks access, the economy is cornered. Gold is a currency that no one can freeze.
Sanctions against Russia: China saw how the U.S. froze hundreds of billions of dollars in Russian reserves. The lesson: “Paper can be taken from you. Gold cannot.”
Internal crises: Evergrande, the world’s largest real estate developer, went bankrupt with more than $300 billion in debt. This destroyed confidence in China’s financial system. They are buying gold to restore the credibility of the yuan.
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Interesting fact:
China has banned the export of gold — everything they mine stays at home. It is a “golden wall” for the future.
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Russia: Gold Instead of Dollars
When sanctions came in 2014 after the annexation of Crimea, Russia realized that the U.S. and EU could freeze its dollars and euros at any moment.
The central bank began stockpiling gold. By 2023 it holds more than 2,300 tons.
Their strategy: “If we have gold, we can always pay — if we have dollars, we can become prisoners.”
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Russian governor Elvira Nabiullina:
“Gold is a currency that does not require permission from another country.”
When the West excluded Russia from SWIFT in 2022, gold was what kept the economy alive. Russia used gold to purchase Chinese imports, settle debts, and finance the war.
India: Gold as Cultural and Financial Reserve
- India is a special case. Its households own more than 25,000 tons of gold — more than all the world’s central banks combined.
- Every wedding, every festival brings new tons of gold into Indian families.
- But the Reserve Bank of India is also buying. In 2022 it added 33 tons, and even more in 2023.
- Why?
- Traditional trust: People trust gold more than banks.
- Rupee inflation: Gold protects value when the currency falls.
- International context: As one of the world’s largest economies, India wants to reduce dependence on the dollar.
An Indian saying goes: “Gold is the milk of the gods and the bread of the people.”
Image: In India, gold is both tradition and financial security, with weddings and festivals driving one of the world’s largest sources of gold demand.
Turkey: Gold as the Last Defense Against Inflation
The Turkish lira has lost more than 80% of its value over the past decade.
Inflation reached 85% in 2022. People rushed to buy gold — and this did not go unnoticed.
Turkey’s central bank followed. In 2022 it bought 148 tons of gold — the most in the world.
- Why? Because citizens were already fleeing into gold, and if the state ignored it, it would lose control.
For Turkey, gold is a “currency of trust” when its own currency collapses.
The United States and Fort Knox: Gold as Myth and Power
The United States officially holds the largest gold reserves in the world — more than 8,133 tons. Most of it is said to lie in Fort Knox, though the public has not seen it since the 1950s.
- Why do they keep it?
- Wars: During World War II, the U.S. received gold from allies as payment for weapons.
- The dollar: Gold underpins confidence in the dollar, even though the U.S. claims the dollar is “unbacked.”
- Power: As long as they hold the most gold, they can claim to have “the world’s strongest currency.”
- But critics say: if everything is fine, why hasn’t it been shown for 70 years?
Europe: Gold as a Link to History
- Germany: Holds 3,300 tons. After public pressure, in 2013 it repatriated part of its gold from the U.S. and France back to Frankfurt. This was a political message: “We want our gold at home.”
- Italy: 2,400 tons — more than most global powers. During the financial crisis, Berlusconi stated: “Our gold is our strength against bankruptcy.”
- France: Also around 2,400 tons. In the 1960s, De Gaulle publicly exchanged U.S. dollars for gold — weakening the dollar and contributing to the end of the gold standard.
- Europe knows from history: when currencies collapse, gold remains.
Image: Countries like Germany, Italy, and France hold thousands of tons of gold as part of a long-term strategy to preserve monetary sovereignty.
What Has Gold Replaced?
- In the past, central banks held reserves in:
- U.S. dollars,
- euro-denominated bonds,
- British pounds,
- Japanese yen.
But all these currencies are under pressure today — inflation, money printing, political tensions. Gold is replacing these paper reserves and becoming the main form of security.
International Context: A World Without Trust
- Wars: Ukraine showed that the financial system can be used as a weapon.
- Sanctions: $300 billion of Russian reserves were frozen. China does not want the same fate.
- Corporate collapses: Lehman Brothers (2008), Evergrande (2021) — billions disappeared. Gold remained.
- Inflation: Europe and the U.S. are experiencing the highest inflation since the 1970s.
- When everything trembles, central banks buy gold because they know: gold carries no credit risk.
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Conclusion: Gold as a Silent Guarantor
- China stockpiles it as a shield against the dollar and collapsing giants like Evergrande. Russia uses it to survive sanctions. India sees it as cultural heritage and security. Turkey relies on it to defend against inflation.
- Europe brings it home. The United States keeps it as myth and power.
- Each country has its own reason — but the goal is the same: protection against an increasingly uncertain future.
- When central banks, which can print unlimited money, accumulate gold — then perhaps people who do not have that option should consider doing the same.
FAQ
To protect against inflation, sanctions, and declining trust in the US dollar.
The United States, officially 8,133 tons.
Paper currencies (USD, EUR, GBP, JPY).
That all domestically mined gold remains as a national reserve.
Because it was excluded from the Western financial system.
Around 35,000 tons — the highest level since 1967.
