Gold is a financial commodity owned by prudent and diversified investors because in bearish market conditions it tends to be a safe investment due to its negative correlation with risky assets.

Nonetheless, this asset is also owned by governments in order to cushion the market decline. Issues like inflation and currency depreciation are mitigated by the fact that gold is used as a shield for financial sanctions and crisis.

But why is gold the pilar of our financial system? To start with, we live in a society which trusts in a fiat monetary system that hasn’t an intrisic value itself. There was a game changer in 1944 with the Bretton Woods Agreenment, it led to convert dollars into gold (35 USD/ounce) turning its role as the anchor of the international monetary system which indirectly encouraged Central Banks to hold gold as a core component of their reserves.

However, there was a turning point in 1971 with the Nixon Shock and the collapse of the Bretton Woods Agreenment. The former US President Richard Nixon ended the US dollar’s convertibility to gold due a structural contradiction. USA started issuing more dollars than they could back up with gold which made the system mathematically impossible if they wanted to keep up their gold reserves.

Asian economies initially faced a structural disadvantage under the Bretton Woods system, as the issuance of the reserve currency and the accumulation of gold were concentrated in the West. However, export growth and strategic reserve accumulation have allowed many Asian countries to progressively offset and in some cases reverse that initial imbalance.

As we can see in the market, the value of this asset is reaching all-time highs even outperforming the S&P 500 so far in 2025. This is explained by the geopolitical tensions, inflationary threats and skepticism regarging cryptocurrencies. But this trend has a meaning and the reason to analyze the context of gold reserves must be to understand what is the reason why Central Banks are increasing their reserves and the impact it may have in the future.

What is clear apart from being a relic of the past has been converted into a termometer of financial system health determined by the accumulation of the central Banks, not just as a defensive measure but also a caution signal from economic challenges. This can be translated as a fragile system which is signaling an unprecedented decline of a fiat system not supported anymore by its most essential asset: confidence.

In a scenario of reversible globalization, gold is the asset that allows emerging countries to intensify their independence and self-sufficiency in order to don’t depend anymore on the value of the dollar and winning this economic war.

In a world where trust is increasingly scarce, gold remains the asset of last resort, not because it guarantees growth, but because it survives uncertainty. Does this increase in global gold reserves indicate that uncertaintainty is also in all-time highs?

By Sergio López-Chow