Inflation Is Up But Gold Isn't — Why China and Korea's Central Banks Have Stopped Buying

Inflation has been real — you feel it at the grocery store, at restaurants, everywhere. So here's the puzzling part: gold, the asset everyone says protects you from inflation, hasn't moved much. What's going on?

Why Is Gold Called an Inflation Hedge?

Gold has long been considered an inflation hedge — an asset that holds its value when rising prices erode the purchasing power of money. The logic is simple: governments can print more money, but no one can print more gold. It has to be mined, which means supply is naturally limited. So when paper money loses value, gold — being scarce and tangible — tends to hold or gain value. History has backed this up, which is why the idea stuck.

So Why Isn't Gold Rising Right Now?

The biggest movers in the gold market aren't individual investors — they're central banks. Institutions like the People's Bank of China and other national reserve managers trade in volumes that can shift the entire market. And lately, they've gone quiet. China's central bank hasn't bought a single gram of gold in 22 months. The Bank of Korea hasn't increased its gold reserves in over 13 years. The big buyers have stepped away, and the market is feeling the absence.

Why Have Central Banks Stopped Buying Gold?

Gold has one glaring weakness from a central bank's perspective: it pays no interest. U.S. Treasury bonds, on the other hand, generate steady interest income and can be sold quickly whenever needed — making them highly liquid. With U.S. interest rates elevated, holding Treasuries is simply the more profitable move. There's also a strategic dimension: many central banks have a vested interest in maintaining the dollar-dominated global financial system, which means holding dollar assets rather than gold.

For gold to stage a meaningful rally, one of two things would likely need to happen: central banks resume buying, or geopolitical risk spikes sharply — think major conflicts or financial crises. Right now, individual investors are steadily putting money into gold ETFs (funds that let you invest in gold like a stock, without physically owning it), but that alone hasn't been enough to push prices significantly higher.