The Indicator from Planet Money

Why is everyone buying gold?

October 1, 2025

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  • The current gold rush is driven by a fundamental shift away from the U.S. dollar, evidenced by central bank purchases from nations like Russia and China seeking assets outside U.S. control. 
  • A significant, though speculative, driver for gold demand is the potential for commercial banks to include gold as a high-quality liquid asset under forthcoming Basel III rule changes. 
  • Despite short-term volatility, the long-term real return of gold, measured over centuries, is approximately zero, suggesting current price movements are due to specific demand shocks rather than sustained inflation hedging. 

Segments

NPR Funding Status Update
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(00:00:04)
  • Key Takeaway: NPR experienced its first day without federal funding in over 50 years.
  • Summary: NPR ceased receiving federal funding for the first time in over five decades. The hosts affirmed their commitment to continuing economic reporting on The Indicator from Planet Money. Listeners were thanked for their continued support.
Gold’s Unexpected Performance
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(00:00:46)
  • Key Takeaway: Gold has significantly outperformed major stock indexes over the last year despite cooling inflation.
  • Summary: Gold has been performing exceptionally well, beating major stock indexes over the past 12 months. This performance is counterintuitive because gold is traditionally expected to act as an inflation hedge, moving when inflation rises, not when it cools. The metal’s current rally suggests it is responding to factors other than inflation.
De-dollarization and Central Banks
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(00:03:40)
  • Key Takeaway: The weaponization of the U.S. dollar following the Russia-Ukraine invasion is driving central banks, notably Russia and China, to accumulate gold reserves.
  • Summary: Finance professor Campbell Harvey identifies de-dollarization as a primary driver for the gold rush. The freezing of Russian bank accounts and proposals to seize those assets for Ukraine demonstrated the U.S. and allies weaponizing the dollar. Consequently, countries like Russia and China are buying gold to hold reserves that cannot be easily seized by other nations.
Chinese Insurance Buying
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(00:05:02)
  • Key Takeaway: Chinese insurance companies are becoming major gold buyers due to regulatory changes allowing them to hold up to 1% of reserves in the metal.
  • Summary: Insurance companies require safe assets to cover potential claims, making gold an attractive option. China recently changed regulations to permit its insurance firms to hold up to 1% of their reserves in gold. This single regulatory shift accounts for an estimated $27 billion in buying pressure.
Speculative Basel III Bets
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(00:05:30)
  • Key Takeaway: Speculators are betting that gold will be classified as a high-quality liquid asset under the ongoing Basel III banking regulations.
  • Summary: Speculators are diversifying away from traditional assets, anticipating a rule change that would allow commercial banks to hold gold to back deposits during stress tests. If gold is officially included as a high-quality liquid asset, the resulting demand shock could dwarf the impact of gold ETFs introduced in the early 2000s. Currently, this inclusion remains speculative.
Gold Supply Constraints
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(00:08:24)
  • Key Takeaway: The limited above-ground supply of gold, equivalent to three Olympic swimming pools, makes the market highly sensitive to new buyer demand.
  • Summary: The total amount of gold ever mined is small enough to fit into roughly three Olympic-sized swimming pools. New mining supply is insensitive to price increases, meaning production cannot quickly ramp up to meet sudden demand. This limited and inelastic supply amplifies the price impact of institutional and speculative buying.
Long-Term Gold Value Stability
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(00:09:13)
  • Key Takeaway: Over centuries, the real value (inflation-adjusted return) of gold is nearly zero, though it fluctuates significantly over shorter periods.
  • Summary: Data from Roman centurions 2,000 years ago shows that the real purchasing power of gold has remained remarkably stable over long timescales. The annual pay of a Roman centurion in gold translates to about $140,000 today for a U.S. Army major. This historical stability contrasts with its high volatility over decades, confirming that current price spikes are not based on long-term appreciation.