All countries are buying gold indiscriminatelyImage Credit source: ai generated
Why is the world buying gold? Nowadays, if you look at the price of gold, you would get dizzy. Sometimes the price is touching the sky, and sometimes it is falling suddenly. The common man thinks that maybe it is the wedding season or the ups and downs of the market, but the reality is much deeper and scarier than this. This is not just about gold and silver, this is the story of an ‘invisible war’ going on between the superpowers of the world. There is a rush all over the world to buy gold that has never been seen before. China has accumulated 2303 tonnes of gold in its treasury and India is not far behind, we now have 880 tonnes of gold in reserve. All this is not happening suddenly. Behind this is the fear of aggressive policies of US President Donald Trump and the rising confidence in the supremacy of the US dollar. Let us understand in detail what has happened that the world is now relying on yellow metal (gold) instead of paper notes (dollars)?
How did the world run when there were no notes?
To understand the whole matter, we have to go back a little in history. About 8 thousand years ago. There was neither rupee nor dollar then. Man used to do farming and used to work through ‘barter system’. Meaning, if you had wheat and wanted milk, you looked for a man who had milk and wanted wheat. But there was a big problem in this… sometimes it became difficult to match the requirements.
Then ‘commodity money’ came in 3000 BC. Things like barley, wool and silver started being used as money. After this, in 1200 BC, China considered cowries as currency. In 600 BC, the king of Turkey (then Lydia) started minting gold and silver coins. But it was difficult to travel with the weight of coins. China found a solution to this problem and gave ‘paper notes’ to the world about 1000 years ago. The people of China would deposit their gold and silver and take paper receipts (notes) in return.
How the dollar became the ‘Don’ of the world
The wheel of time turned and by the 19th century the world came to the ‘Gold Standard’. Its rule was simple, the country could print as many notes as it had in reserve. At that time Britain’s ‘Pound Sterling’ was the boss of the world because 60% of the world’s trade was done in it. But the first and second world wars broke the back of Britain. To fight the war, Britain printed notes indiscriminately and the rule of gold was broken. On the other hand, America was playing smart. When Europe was burning, America was selling them weapons, food and raw materials and taking gold in return. Times changed: By the end of the Second World War, two-thirds of the world’s gold reached America’s coffers.
In 1944, a meeting of 44 countries was held in Bretton Woods city of America. Everyone accepted that since America has the most gold, now the value of every currency in the world will be determined by the dollar and the value of the dollar will be determined by gold (35 dollars = 1 ounce of gold). It was from here that the dollar became the world’s ‘global currency’.
America spent money like water in wars
America became the Chaudhary of the world but to show its power it spent money like water in wars like Vietnam. The situation became such that America printed many times more dollars than the gold it had. Other countries became suspicious. They started reaching America with their dollars and said… “Give back our gold.” America’s gold reserve started emptying. Then in 1971, US President Richard Nixon took a decision that shook the world. He clearly said that now America will not give gold in exchange for dollars. This is called ‘Nixon Shock’ in history. By law, the dollar should have become worthless that very day because it was no longer backed by the guarantee of gold. This is what we call today ‘Fiat Money’, that is, the money which runs only on the trust of the government.
‘Oil game’ to save the sinking dollar
When confidence in the dollar began to deteriorate, America took a new step. In 1974, America made a secret agreement with Saudi Arabia. Saudi Arabia had immense oil but no security. America said, “We will give you weapons and security, in return you will sell your oil only in dollars.” It was from here that ‘Petrodollar’ was born. Now every country in the world needed oil, so to buy oil they were forced to buy dollars. In this way America forcefully maintained the demand for its currency.
Why is the world scared now?
Now let us come to today’s situation. The recession of 2008 and then Corona shook the American economy. But the biggest shock came in 2022 during the Russia-Ukraine war. To teach Russia a lesson, America seized (froze) its foreign exchange reserves worth $300 billion.
This incident woke up the whole world. China, India and the Gulf countries thought that today it has happened with Russia, if tomorrow we have a fight with America, then our billions and trillions of dollars will also turn into dust in a second. The world understood that America was using the dollar as a ‘weapon’.
Donald Trump has further fueled this fear. Trump has openly threatened the BRICS countries. He has said that if these countries try to create their own new currency by leaving the dollar, then 100% tariff (tax) will be imposed on them.
Countries around the world currently have reserves worth about $6.7 trillion. If we look at Trump’s past record (like sanctions on Iran, Venezuela), countries fear that America can grab their money at any time. This is the reason why now no country wants to take risk on ‘paper dollars’.
That’s why gold is being bought indiscriminately
Due to this crisis of confidence, Central Banks around the world are now buying gold by selling dollars.
- China: China’s gold reserves have increased by 483% between 2000 and 2025.
- India: In 2005 we had only 4.3% gold of total reserves, which has increased to 15% in 2025.
- Condition of Dollar: In 2016, 65% of the world’s total reserves were dollars, which has now reduced to 58%.
Countries like Poland and Turkey, which did not keep gold earlier, are now standing in line and buying gold. Everyone has understood one thing that in difficult times, paper currency may become trash but gold will always shine.
The influence of the dollar will not end so soon
Experts believe that the influence of the dollar will not end so soon, because 50% of the world’s trade is still done in dollars, but the way Russia and China are doing business in their local currency (99% of Russia-China trade is now in local currency), it is definitely challenging the supremacy of the dollar. The coming times are full of uncertainties. If Trump continues to take decisions on his own accord, it is certain that there will be major upheaval in the world economy. Till then, every country wants to fill its coffers with as much yellow metal as possible for its security.