The Enduring Saga of Gold: From Cosmic Beginnings to Geopolitical Powerhouse

Gold’s radiance has charmed civilisations for thousands of years, embodying wealth, stability, and prestige across cultures. As a cornerstone of economies and a strategic asset in global politics, its significance remains unparalleled today, with central banks amassing gold reserves and tariff disputes reshaping international trade, gold’s role is more critical than ever. Therefore, it becomes more important than ever to delve into gold’s origins, its historical evolution, the global supply, national holdings, the complexities of auditing, and its vital place in the current geopolitical landscape.

Tracing Gold’s Past: A Historical Odyssey

Gold’s allure predates written records. Archaeological finds indicate that humans began shaping gold around 4000 BCE (Before Common / Current Era) in regions like Eastern Europe, crafting decorative items from its naturally occurring nuggets. By 3000 BCE, ancient Egyptians were mining gold in Nubia (now Sudan), creating intricate jewellery and adorning royal tombs to symbolise divine favour. In Mesopotamia, gold served as a medium of exchange, foreshadowing its monetary role.

 The 19th-century gold rushes in California (1848), Australia (1851), and South Africa (1886) triggered frenzied migrations to newly discovered goldfields. Thousands flocked to mine gold, boosting economies, transforming towns, and attracting diverse settlers. They spurred growth but harmed Indigenous populations and environments.

In the modern era, gold underpinned the gold standard, which tied currencies to its value until the system collapsed in 1971. Today, gold fuels jewellery (50% of demand), investments (40%), and technology (10%), with global production hovering around 3,000 metric tons annually. Its scarcity, durability, and universal appeal ensure its lasting value.

Quantifying the World’s Gold Supply

According to the US Geological Survey (USGS), approximately 244,000 metric tons of gold have been identified globally—187,000 metric tonnes (MT) already mined and 57,000 MT in known reserves. If collected, this gold would form a cube roughly 23 meters per side. Major producers include China, Australia, and South Africa, with the U.S. ranking fourth. The World Gold Council estimates total mined gold at 205,000–210,000 MT, with a yearly output of 2,500–3,000 MT.

Gold reserves that are economically extractable with current methods are estimated at 50,000–54,000 MT and concentrated in Australia, Russia, and South Africa. While traces of gold exist throughout the Earth’s crust, potentially in millions of tons, it’s too diffuse to mine. The planet’s core may harbour vast quantities, but it’s unreachable. Practically, the world’s usable gold is limited, which makes it rare and valuable.

National Gold Reserves: Who Holds the Most?

Central banks hold about 20% of all mined gold, roughly 35,000–36,000 MT, as a buffer against economic and political instability. Based on the World Gold Council’s 2024 data and International Monetary Fund (IMF) reports (as of February 2025), here are the top gold-holding nations:

United States: 8,133.46 MT, stored at Fort Knox, West Point, and New York’s Federal Reserve. Gold comprises over 75% of its reserves, underscoring its economic strength.

Germany: 3,352.65 MT, kept in New York, London, and Frankfurt. Gold forms two-thirds of its reserves, bolstering the euro.

Italy: 2,451.84 MT, held by Banca d’Italia to ensure monetary stability.

France: 2,436.50 MT, supporting the euro and financial security.

Russia: 2,332.74 MT, expanded to counter sanctions and reduce dollar reliance.

China: 2,235 MT, with 225 tons added in 2023.

Switzerland: 1,040 MT, the highest per capita worldwide.

Japan: 845.97 MT stabilising the yen.

India: 876 MT, increased in 2024 after repatriating 200 MT from London.

The Challenge of Auditing Gold

It is difficult to confirm and verify gold reserves as central bank prioritises security and sovereignty. The U.S. has been conducting a full audit since the 1950s and Germany’s Bundesbank, under public pressure, audited and repatriated 674 tons from New York and Paris by 2017.

Gold leasing and swaps muddy the waters, in our view. Banks lend gold to bullion dealers, who sell it, potentially inflating reported holdings. Unreported transactions like domestic purchases by Uzbekistan or Kazakhstan add uncertainty. The World Gold Council corrects for known errors, but transparency is limited. Independent audits could restore trust, but geopolitical concerns make them rare.

Gold’s Strategic Role in Today’s Geopolitics

Renowned investor Ray Dalio once said, “If you don’t own gold, you know neither history nor economics.”

Since the 2008 financial crisis, central banks have accelerated gold purchases, acquiring 1,136 MT in 2022—the highest since 1967. Countries like China, Russia, and India are diversifying from the U.S. dollar as a protective measure against sanctions and economic volatility. Gold’s independence from counterparty risk and resilience against currency devaluation make it a prized asset.

The IMF highlights that sanctions by Western nations increase the appeal of gold over dollar-based assets. Russia, hit by sanctions since 2014, has prioritised gold to reduce dollar dependency. China’s purchases balance its dollar-heavy portfolio, while India’s repatriation of 200 MT from London in 2024 reflects fears of asset freezes amid tariff tensions.

Tariff wars, particularly U.S. policies in 2024–2025, have heightened gold’s relevance. Tariffs on Chinese goods and counter-tariffs destabilise trade, weaken currencies, and drive inflation. Gold prices spiked 3% during crises like the 2023 Israeli-Palestinian conflict, proving its safe-haven status. Central banks see gold as a shield against currency conflicts and trade disruptions, with Poland and China setting purchase records in 2023.

What’s Going on With Central Bankers Buying Gold?

May be central bankers are seeing something coming or have a view of fiat monetary system which may  not be very clear to the general public. Very clearly the central bankers are buying gold, preferring it over U.S. Treasuries. Foreign central banks now hold more gold than U.S. Treasuries - for the first time in 29 years.

From its stellar origins to its geopolitical clout, gold’s value remains unmatched.  In an uncertain world where auditing hurdles persist, we believe that gold’s timeless value shines brighter than ever, anchoring nations and investors alike.

Sources: U.S. Geological Survey (USGS), World Gold Council, International Monetary Fund (IMF), Forbes India, ScienceDirect, Financial Express.

Fund Manager Disclosure: 

• The fund manager, relative or associate may have financial interest in the subject company

• The fund manager, relative, associate or Alchemy, may have an actual or beneficial ownership of 1% or more or long/ short positions in the subject security(ies) for himself     or for the clients.

• The fund manager or associate may have received compensation or other benefit in the subject security(ies).

• The discussions shall not be relied upon as advisory or decisions to buy or sell any securities.

Disclaimer:

• ^These are investment ideas and there is no assurance that these will form part of client’s portfolio.
• Investments are subject to market risks, please read all product /strategy related documents carefully before investing.