Gold is shifting from a portfolio afterthought to a core policy anchor for sovereign nations. Between 2022 and 2024, central banks accumulated a staggering 3,255 tonnes of the metal, marking the most aggressive three-year buying spree since the 1970s. This strategic pivot toward monetary sovereignty is unfolding as the world’s paper-based financial markets show increasing signs of fragility.

Three powerful forces are driving this remonetization: relentless accumulation by official state sectors, structural constraints on global supply, and the emerging potential of tokenization to modernize gold’s role as a transparent and accessible asset.

Sovereigns Are Voting With Their Vaults

The rhythm of the modern gold market is being set by official purchases. Central banks bought 1,136 tonnes in 2022 and another 1,037 tonnes in 2023, with buying in 2024 remaining well above the 1,000-tonne mark. This activity is concentrated in countries seeking to insulate themselves from sanctions and explore alternative settlement systems. Nations like China, Turkey, and Poland have not only increased their reserves but have also prioritized holding the physical gold within their own borders.

A similar trend is visible in Europe, where a wave of repatriation has seen hundreds of tonnes of gold brought home to Germany, the Netherlands, Austria, and Poland. This global move toward domestic custody underscores a growing desire for financial autonomy in an uncertain geopolitical landscape.

Supply Is Disciplined by Geology and Time

While demand surges, the global gold supply remains structurally inelastic. World mine output has plateaued for years, edging up to just 3,661 tonnes in 2024. The industry faces a future of potential decline, driven by rising capital expenditures and increasingly long permitting cycles. It now takes an average of 16 to 18 years for a new mine to progress from discovery to its first pour of metal, a timeline that extends far beyond most policy and investment cycles.

Recycling offers some relief but can’t close the gap, contributing only about a third of the annual mine supply. This fundamental scarcity is reshaping the market, with historic producers like South Africa—once the world’s dominant miner—seeing their global output share dwindle.

Logistics, Bottlenecks, and Illicit Markets

What were once simple logistics are now critical monetary vulnerabilities. Switzerland’s refining complex, the most important throughput hub in the world, has been operating near full capacity to keep up with churning global flows. This concentration creates significant risk, placing refining capacity and air-cargo constraints on the same level of importance as interest-rate differentials.

At the same time, compliance frameworks have inadvertently expanded a vast illicit circuit by cutting off artisanal producers from formal banking channels. According to a Swissaid report, at least 435 tonnes of gold were smuggled out of Africa in 2022 alone—an amount accounting for more than 10% of the year’s global mine output. This shadow economy creates major tax losses for producer states and distorts market transparency.

The Paper Market’s Counterparty Risk

Financial instruments like futures, Exchange-Traded Funds (ETFs), and unallocated accounts provide liquidity and price discovery, but they also introduce layers of counterparty risk. These “paper gold” markets rely on a system of trust that many are now reassessing. By December 2024, the COMEX futures market had open interest totaling 52 million ounces against just 3.2 million registered ounces available for delivery. This represents more than 16 claims for every physical ounce.

A similar leverage exists in London, where estimates suggest between seven and nine claims exist for every bar in the unallocated pool, mirroring the mechanics of fractional-reserve banking. This risk only disappears with the physical delivery of allocated gold, a reality that is driving a premium on verifiable custody. In the third quarter of 2024, for instance, premiums in Shanghai held above $25 per ounce even as COMEX prices softened—a clear signal of physical demand overriding paper quotes.

Tokenization Can Modernize an Ancient Anchor

In this fragmented environment, the financial world is rediscovering an old truth: assets with no issuer liability provide the cleanest form of settlement. Blockchain technology now makes it possible to make that settlement programmable. Properly structured tokenization—backed by allocated, segregated, and audited physical metal—can dramatically increase transparency and reduce settlement friction while preserving gold’s core monetary attributes.

By the end of 2024, the market for tokenized gold had already grown to over $1.5 billion in assets, doubling from the previous year. For households and smaller institutions, tokenization offers unprecedented access through smaller denominations and lower minimums, creating a modern bridge to the world’s oldest monetary anchor.

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A new financial framework is emerging by merging the physical certainty of gold with the efficiency of digital verification. This hybrid approach creates a more resilient backbone for cross-border payments, collateral management, and savings, especially in jurisdictions where access to traditional custody services is limited. To succeed, builders must focus on clear disclosure and final settlement, while policymakers need to align on legal title and supervisory rules.

A Practical Playbook for a New Era

For sovereign nations, the lesson is strategic. It’s time to codify a reserve policy that includes non-correlated assets like gold and develop secure domestic custody to reduce third-party risk. Financial institutions should also shift their perspective, treating gold as working capital for the balance sheet rather than a speculative instrument. The key is to optimize for delivery, collateral treatment, and interoperability with existing payment rails, preparing for gold to re-enter capital markets as a programmable asset.

This transformation requires a broad commitment to new standards. Households should focus on building documented core reserves through transparent channels with known provenance. For the industry at large, the path forward involves converging on unified audit standards, full traceability, and reliable delivery systems. These steps are essential to reconnecting the world of compliant finance with real-world supply.

Monetary policy will inevitably absorb these realities, whether or not it acknowledges them publicly. The return to gold-standard thinking is an operational response to a world that prizes final settlement over promises.