The Gold Market in 2025: Trust, Debt, and the Shifting Global Order
- Frank S. O'Hara
- Oct 2
- 4 min read
Updated: Oct 7
Are We Returning to the Gold Standard?
The gold market has once again captured global attention, breaking through historical resistance levels in 2024 and continuing its upward momentum into 2025. This surge is fueled by a complex interplay of geopolitical tensions, persistent inflation, record debt burdens, and accelerating de-dollarization efforts among emerging economies. Gold’s role as a hedge against financial instability has only strengthened, suggesting a prolonged bull cycle ahead.
Money and Trust
At its foundation, money is built on trust. From salt and tobacco in early societies to paper notes and digital ledgers today, what constitutes “money” is defined by social acceptance. Fiat currencies depend on governments and central banks, exposing them to counterparty risk. Gold, by contrast, has no counterparty liability and is universally recognized as a store of value. This durability has made it indispensable during times of uncertainty, particularly in today’s environment of rising inflation, sovereign debt crises, and weakening confidence in central banks [1].
The Hierarchy of Money and Exter’s Pyramid
Perry Mehrling’s hierarchy of money and John Exter’s inverse pyramid both situate gold at the base of the global financial system, the ultimate anchor when trust in credit collapses. The expansion and contraction of credit-based assets, derivatives, equities, and bonds create cycles of boom and bust. In downturns, capital flows downward into gold. Currently, gold represents just 3 percent of global financial assets, far below the 7–10 percent seen during crises like the late 1970s stagflation and the early 1940s wartime period. This gap signals significant upside potential [2].
Gold and Debt Cycles
The global debt burden has now surpassed $315 trillion, representing more than 330 percent of global GDP. Much of this is fueled by record U.S. government deficits, corporate borrowing, and leveraged financial markets. Inflation is no longer seen as “transitory” but structural, with supply chain realignments, energy transitions, and fiscal spending amplifying pressures. Gold historically performs strongly during such debt-driven cycles, serving as an escape valve when trust in sovereign credit deteriorates [3].
The US Dollar and De-Dollarization
The U.S. dollar remains the dominant reserve currency, but its position is increasingly challenged. The freezing of over $300 billion in Russian reserves in 2022 marked a turning point, accelerating a wave of diversification among central banks. BRICS nations have since expanded gold holdings aggressively, with China, India, and Russia leading purchases. Central bank gold buying reached a record 1,037 metric tons in 2023 and continued strongly through 2024, marking the most sustained period of official-sector demand in modern history [4].
The ratio of U.S. gold reserves to outstanding dollars is once again approaching historically low levels, reminiscent of the periods before the 1971 Nixon shock and the 2000s bull run. With the U.S. now facing trillion-dollar annual interest costs on federal debt, the dollar’s perceived reliability is weakening. Gold’s rise is not simply a speculative cycle but part of a larger structural adjustment away from sole reliance on the dollar [5].
Gold as a Hedge Against Inflation and Currency Devaluation
Gold’s function as an inflation hedge remains intact. Historically, a surge in gold prices precedes inflationary spikes by one to two years. With energy transitions requiring vast commodity inputs and governments deploying fiscal stimulus to maintain growth, inflation risks remain elevated. Meanwhile, countries like China and India are increasing gold reserves as a hedge against currency volatility. In 2024, China’s official reserves surpassed 2,300 metric tons, though analysts estimate actual holdings are far higher [6].
Equity Bubbles, Asset Inflation, and Gold
The U.S. equity market, measured by the Buffett Indicator (market capitalization to GDP), remains historically elevated, despite a slowdown in tech earnings and rising capital costs. Bubbles fueled by low interest rates and central bank liquidity injections have set the stage for corrections. Gold tends to benefit during equity drawdowns, as investors seek uncorrelated safe-haven assets. If equity valuations contract toward historical norms, gold’s demand will likely rise significantly [7].
Cultural and Geopolitical Dimensions of Gold
Beyond financial markets, gold retains deep cultural significance, particularly in Asia. In India, gold consumption tied to weddings and festivals like Diwali drives consistent demand. In China, gold symbolizes wealth and stability, and its accumulation aligns with the government’s broader strategy of reducing reliance on the U.S. dollar. Russia, meanwhile, has leveraged its role as one of the world’s largest producers to strengthen financial sovereignty under sanctions. Collectively, BRICS nations are using gold as both a geopolitical tool and a reserve hedge, advancing efforts to build trade systems outside the Western financial order [8].
Gold’s Future in the Global Financial System
The current trajectory suggests that gold is regaining prominence as a reserve asset in a multipolar world. BRICS discussions of a commodity-backed settlement system highlight the growing role of gold in anchoring trade outside the dollar system. Meanwhile, Western institutional investors, once absent, are re-entering the gold market through ETFs and physical allocations.
With debt cycles stretched, fiat credibility under strain, and geopolitical fragmentation accelerating, gold’s next bull phase may redefine its place in the financial order. In many ways, the 2020s echo the 1970s high inflation, geopolitical conflict, fiscal stress conditions that previously fueled a decade-long gold rally.
Conclusion
All signs point to a sustained gold bull market in the coming years. Its role as money without counterparty risk, its cultural and geopolitical significance, and its growing adoption by central banks and private investors converge to reaffirm gold as the ultimate store of value. As the global financial system faces structural realignment, gold is not simply appreciating in price, it is reasserting its central role in the hierarchy of money.
Works Cited
World Gold Council. “Gold Demand Trends Q4 2024.” World Gold Council, 2025.
Mehrling, Perry. The New Lombard Street: How the Fed Became the Dealer of Last Resort. Princeton University Press, 2011.
Institute of International Finance. “Global Debt Monitor 2024.” IIF Reports, 2025.
World Gold Council. “Central Bank Gold Demand at Record Highs.” World Gold Council, 2024.
Exter, John. “The Inverted Pyramid: An Analysis of Financial Assets.” Federal Reserve Archives, 1962.
People’s Bank of China. “Monthly Gold Reserve Data.” PBoC Bulletin, 2025.
Buffett, Warren. “Market Valuations and GDP Ratios.” Berkshire Hathaway Annual Letter, 2024.
BRICS Economic Forum. “De-dollarization Strategies and Commodity Backed Settlement.” BRICS Policy Papers, 2024.
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