Central banks and ultra-high-net-worth individuals worldwide sharply accelerated their gold purchases in the second quarter, signaling a clear shift toward gold as a replacement safe-haven asset for U.S. Treasuries. According to data released by the World Gold Council on the 12th, central banks’ net gold purchases reached 288.9 tonnes in Q2, a 4.1-fold surge from 56.5 tonnes in Q1.
During the same period, net gold purchases by ultra-high-net-worth individuals rose 34% from 243.7 tonnes to 327.1 tonnes. In contrast, U.S. Treasuries are rapidly losing their investment appeal as yields spike to record highs amid concerns over widening fiscal deficits. Experts anticipate that gold’s displacement of U.S. Treasuries in the global safe-haven asset hierarchy will continue for some time.
Foreign Exchange Reserve Composition Reverses — Gold Share Surpasses U.S. Treasuries
Gold’s share of total foreign exchange reserves held by central banks worldwide reached 27% as of the end of last year, already exceeding the 22% allocation to U.S. Treasuries. Central banks are not stopping at physical gold purchases — they are also extending into gold-linked investment products.
The Bank of Korea invested $250 million (approximately 340 billion won) in overseas-listed gold exchange-traded funds (ETFs) during the second quarter of this year. This marks the first time since 2013 that South Korea’s central bank has acquired gold-related assets. In August alone, global gold ETFs saw net inflows of $18 billion (approximately 24.2 trillion won), the second-largest monthly figure on record.
Gold prices are also on a steep upward trajectory. Spot gold prices, as measured by the London Bullion Market Association (LBMA), stood at $4,409.9 per troy ounce at the end of August (approximately 5.9 million won), up 8.23% from $4,073.9 at the end of July. August’s gold return of 13% was the highest since December 2025’s 14%, generating a gain of $4,563 per ounce (approximately 6.1 million won) — the third-highest level in the past 25 years.
U.S. Treasuries’ Status Weakens — Gold Storage Facilities Reach Capacity
Analysts point to the U.S. government’s massive fiscal deficit as the underlying cause of declining demand for U.S. Treasuries. The federal government’s total debt increased by $2.8 trillion (approximately 3,757 trillion won) over the past year — the fastest pace outside of the COVID-19 pandemic period. As doubts grow over the government’s debt-servicing capacity, investors have begun demanding additional yield as a risk premium, eroding the safe-haven character of U.S. Treasuries.
The Financial Times reported in March that “the U.S. is increasingly viewed as a less reliable partner than before. U.S. Treasuries are no longer what they used to be.” The report also noted that a gold storage facility in London has reached capacity, requiring expansion to accommodate surging demand for the metal.
The tendency of U.S. Treasuries to move in tandem with risk assets like equities is also cited as a concern. Historically, bond prices rose when stock prices fell, providing a buffer for portfolios. However, since the pandemic, the two asset classes have increasingly moved in the same direction, making diversification through Treasuries more difficult.
BlackRock, the world’s largest asset manager, also stated that “the correlation between stocks and bonds has risen since 2020,” adding that “questions are being raised about the traditional role of bonds as an effective diversification tool.”
Safe-Haven Asset Realignment — Growing Interest in the Gold Market
The simultaneous expansion of gold purchases by central banks and ultra-high-net-worth individuals points to a structural shift in the global safe-haven asset market. As confidence in U.S. fiscal soundness weakens, gold is gaining attention as an alternative asset free from sovereign credit risk.
The massive inflows into gold ETFs, in particular, demonstrate that not only institutional investors but also retail investors are entering the gold market. Reports of London gold storage facilities reaching capacity corroborate that physical gold demand is surging in tandem with investment demand.
That said, some market participants caution about the possibility of a correction following gold’s short-term spike. A 13% monthly return in August is an exceptional level, and profit-taking could emerge. Nevertheless, the prevailing view is that the structural trend of weakening safe-haven status for U.S. Treasuries will be difficult to reverse in the short term.
