There are many answers on the internet. Some say it’s because of trade wars, the U.S. strategy to pay off debt, the threat of World War III, and so on.
In my opinion, those explanations don’t fully address the root cause of why investors have been valuing gold so highly over the past three years.
So what is actually causing gold prices to keep rising? I’ll try to explain what I believe are the most logical reasons in this post.
Gold has been a store of value used by human civilization for hundreds of years. Humans also used gold as a medium of exchange in trade.
In 1971, everything changed. Humans began using the U.S. dollar as a store of value and medium of exchange, with its value based purely on trust. People believed that the U.S. would maintain the value of the dollar through its economic and military power. This is what we call fiat money.
Since then, global wealth assets have been stored in the U.S. in the form of USD.
But something has changed over the past three years.
Central banks have been selling their assets held in the U.S. and buying gold instead.
This is because there is a correlation across global central bank assets between rising gold reserves and declining holdings of U.S. Treasuries / U.S. bonds (which have long served as global stores of value).
This phenomenon aligns with gold prices rising nearly 200% over the past three years.
When examined more closely, the most aggressive gold buyer turns out to be the People’s Bank of China, with extremely massive purchase volumes since late 2022.
At the World Economic Forum 2026, Ray Dalio (a global macro investor) also confirmed this by stating that the financial system as we know it is collapsing. Central banks are shifting wealth from fiat money to gold because fiat money suffers from continuously accumulating debt.
So the continuous rise in gold prices is caused by central banks around the world aggressively buying gold.
Imagine a country hoarding a product with enormous financial power. When demand increases while supply is limited, prices inevitably surge (the law of supply and demand).
But why are central banks buying so much gold?
According to Ray Dalio, it’s due to concerns over ever-growing U.S. debt, which will inevitably impact the U.S. economy.
Remember, the value of fiat money depends heavily on the economic stability of a country.
But beyond debt issues, there is another major reason that I believe motivates central banks to accumulate gold.
When Russia invaded Ukraine in 2022, Russia’s savings held in the U.S. were immediately frozen by the U.S., preventing Russia from accessing its assets.
This became the first alarm for other countries, making them realize:
“Hey, if the U.S. doesn’t like us, these papers (bonds/USD) are essentially worthless—even though they built the financial system themselves. One day, it could be our savings that get frozen.”
Trust in the USD began to erode, while paper assets derive their value entirely from trust.
The country with the most tension against the U.S. is China, which is why China has been consistently reducing its U.S. Treasury holdings and aggressively buying gold—to protect its national wealth.
What makes it worse is that since last year, Trump has appeared to continuously attempt to weaken the USD by attacking the Federal Reserve Chairman with various narratives and accusations.
This clearly affects central bank independence and further erodes trust in the USD.
Eventually, it became evident that the Fed is indeed weakening the dollar. At the end of January 2026, the Fed took a policy step that would reduce the value of the USD.
The Fed is preparing to sell its USD reserves to buy Japanese yen. This USD selling will flood the market with supply and push the dollar’s value down.
So what does this have to do with gold?
When the USD weakens, returns on U.S. investments such as deposits, bonds, and stocks also decline. Investors then move their wealth into other assets that offer more stable and potentially higher returns, one of which is gold.
In conclusion, the biggest driver behind gold’s continuous rally is the declining trust in the U.S. financial system, which has led central banks to hoard gold, followed by the weakening of the USD $PAXG
