Gold and the Monetary Reset Thesis
Central banks have purchased more gold in the past three years than in any period since the end of the Bretton Woods system. We examine the structural drivers of the gold bull market and the monetary reset thesis.
The gold market is experiencing a structural regime change. Central bank demand, which averaged 400–500 tonnes per year before 2022, has exceeded 1,000 tonnes annually since the freezing of Russian foreign exchange reserves in February 2022. This event demonstrated to every sovereign wealth manager that dollar-denominated reserves are subject to political risk.
The de-dollarisation thesis does not require the dollar to lose its reserve currency status — only for its share of global reserves to decline from 58% toward 45–50%. Even a modest shift of this magnitude would represent trillions of dollars in demand for alternative reserve assets, of which gold is the most credible.
Real interest rates remain the most important short-term driver of gold prices. With US fiscal deficits structurally elevated and the Federal Reserve constrained in its ability to raise rates without triggering a debt sustainability crisis, the long-term real rate environment is structurally supportive of gold.
Our base case scenario projects gold reaching $3,200 per ounce by 2028, with a bull case of $4,500 if monetary system restructuring accelerates. The primary risk to this thesis is a resumption of aggressive Fed tightening, which we assess as a 20% probability scenario.
Research Disclaimer: This article is intended solely for informational, educational and research purposes. Nothing in this article constitutes investment advice or a recommendation to buy or sell any security. BGAM™ scores, scenarios and classifications are model-based analytical assessments for illustrative purposes only.