Why is everyone buying gold?

Summary

Podcast Summary: "Why is everyone buying gold?"

Podcast: The Indicator from Planet Money (NPR)
Date: October 1, 2025
Hosts: Adrienne Ma, Darian Woods
Guest: Campbell Harvey (Finance Professor), Ricky Mulvey (Financial Podcaster)

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Overview

This episode explores the recent surge in gold prices despite cooled inflation, unpacking the multifaceted reasons behind the modern "gold rush." The hosts dissect why gold, usually seen as an inflation hedge, is breaking records now and who’s driving the demand. Featuring insights from finance professor Campbell Harvey, the episode delves into de-dollarization, central bank activity, regulatory shifts, and gold's long-term stability.

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Key Discussion Points & Insights

1. Gold's Unusual Surge

• Gold as an Inflation Hedge
  • Typically, gold rises with inflation, but the current surge comes as inflation cools.
  • “It's been beating the major stock indexes and… they represent huge companies that build things and are making money versus a metal that just kind of sits there even though it looks nice.”
    — Adrienne Ma (01:17)

2. Central Banks and De-Dollarization

• De-Dollarization Explained
  • Campbell Harvey attributes much of the boom to central banks, notably Russia and China, reducing their reliance on the US dollar.
  • Geopolitical moves, like the US and allies freezing Russian assets post-Ukraine invasion, have prompted countries to diversify away from dollar reserves toward gold.
  • “So they're building reserves and this is important in terms of the gold market dynamics.”
    — Campbell Harvey (04:14)
• Weaponization of the Dollar
  • The freezing of Russia’s bank accounts illustrated the risks of holding dollar reserves.

3. New Regulatory Factors: Insurance and Commercial Banks

• China’s Insurance Companies
  • China recently allowed insurance companies to hold up to 1% of their reserves in gold, equating to a potential $27 billion influx.
  • “That represents $27 billion of buying.”
    — Campbell Harvey (04:55)
• Speculators and Basel III Rules
  • Speculative buyers are betting on potential regulatory changes (Basel III), which may let commercial banks count gold as a high-quality liquid asset, increasing demand further.
  • “If we assume a 5% allocation to gold… that would cause a demand shock that would dwarf what happened when the ETFs on gold were introduced.”
    — Campbell Harvey (07:23)
• ETF Effect
  • The advent of gold ETFs in the early 2000s transformed gold trading for everyday investors and already locked up $180 billion in physical gold.

4. Gold Supply Constraints

• Limited Physical Supply
  • The total above-ground gold could fit into about three Olympic-sized pools, making supply very finite.
  • “All the gold that's been mined throughout history can fit in about three Olympic sized swimming pools.”
    — Adrienne Ma (08:25)
• Supply Inelasticity
  • Mining production is relatively unresponsive to price hikes, limiting new supply even as prices soar.

5. Gold in the Long Run: Stability and Value

• Gold’s Value Over Centuries
  • Despite price volatility in the short- and medium-term, gold’s long-term (centuries) real value is stable.
  • Campbell Harvey illustrates with Roman centurion pay, showing 2,000 years ago they earned 38 ounces of gold annually—a sum that’s comparable in value today to a US Army major’s salary.
    • “The long-term real return of gold, as in what it's worth after stripping away inflation, is roughly zero.”
      — Adrienne Ma (09:35)
  • “So two things are true. The price of gold is relatively stable in the long term, like centuries. But gold can go up and down a lot over shorter periods of time.”
    — Darian Woods (09:55)

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Notable Quotes & Memorable Moments

• On de-dollarization and central banks:
  “The world isn't relying on US Dollars as much as it used to. And there are a couple of reasons for that. U.S. treasury bonds aren't as risk free as they used to be given a ballooning deficit. But also the Russia Ukraine war.”
  — Darian Woods (03:31)
• On gold’s limited supply:
  “Enough for Scrooge McDuck to dive into, but not so much for the rest of the world.”
  — Darian Woods (08:34)
• On gold's long-term value:
  “In gold, [Roman centurions] were paid 38 ounces a year. And that translates today to the wage of a U.S. army major.”
  — Campbell Harvey (09:16)
• On speculation over regulatory change:
  “If this potential rule change turns into reality and commercial banks can buy gold to back up their deposits, Campbell thinks it would be a big deal.”
  — Darian Woods (07:12)

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Timestamps for Key Segments

• [02:49] — Gold's traditional role as inflation hedge questioned
• [03:31] — De-dollarization and central banks’ gold buying explained
• [04:49] — China’s insurance companies entering the gold market
• [05:24] — Basel III rules and speculative buying
• [08:25] — Gold’s limited supply in the global market
• [09:16] — Historical perspective on gold’s value
• [09:55] — Gold’s stability over centuries vs. short-term volatility
• [10:17] — Recap: three waves of buyers and the uncertainty ahead

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Closing Reflection

The episode concludes on an open note: gold’s price is at historic highs due to a “wave of new buyers,” especially foreign central banks, institutional investors, and speculators gambling on regulatory shifts. But history cautions that, while gold can spike, its real value tends toward long-term stability. Whether this gold rush will last depends on unresolved global trends like de-dollarization and potential changes in bank regulations.

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For more on Basel III and its impact, see the show's linked resources.

Transcript

[Adrienne Ma]

Hey, everyone, it's Adrienne Ma here with Darian woods and Waylon Wong.

[Darian Woods]

Before we start, we just wanted to say that this is the first day NPR has gone without federal funding in over 50 years.

[Adrienne Ma]

To me, NPR has always been a jewel in America's crown, like something that I'm proud to keep protecting even after the federal funding has stopped. Here on the indicator, we're going to keep reporting and explaining the economy so all our listeners can better understand the forces making the world go round.

[Darian Woods]

Thank you for listening and on with the show. Npr.

[Adrienne Ma]

This is the indicator from Planet Money. I'm Jaron woods and today I'm joined by financial podcaster, former co host of Motley Fool Money, Ricky Mulvey.

[Darian Woods]

Hey, Darian, good to see you.

[Adrienne Ma]

Likewise. And you are here to talk about gold.

[Darian Woods]

Yeah, because gold has been a real economic mystery to me. You know, think back to the pandemic where inflation is really shooting up and gold moved a little, but not a lot. And that's what's kind of supposed to happen. It's supposed to be an inflation hedge. But as we've seen over the past 12 months, inflation has cooled and yet gold has been on a tear.

[Adrienne Ma]

It's not what we would expect on the face of it. So it's been beating the major stock indexes and you know, they represent huge companies that build things and are making money versus a metal that just kind.

[Darian Woods]

Of sits there even though it looks nice. Today on the show, what's causing this gold rush? How the war in Ukraine is playing a role. The surprising new buyers bidding up the price and what could come next for this precious yellow metal?

[Adrienne Ma]

That's after the break.

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[Adrienne Ma]

Supposed to be this inflation hedge, something you can sock away to protect your ability to buy stuff in the future. It doesn't depreciate like cash does. But right now the price of gold is going bananas and yet inflation is not.

[Darian Woods]

I reached out to a finance professor who just published a paper on understanding gold.

[Campbell Harvey]

Given the price has been running up, people are thinking about it now.

[Adrienne Ma]

That voice sounds very familiar, Campbell Harvey.

[Darian Woods]

Yes, it is.

[Adrienne Ma]

So Campbell invented one of our show's favorite recession indicators, the yield curve. And we've had him on the show a number. He must be pretty excited to be talking about something else for once.

[Darian Woods]

Oh yeah, he was very happy to chat about his new paper. Darian Campbell says buyers are responding to a fundamental shift in the world. The most important one he believes is de dollarization. The world isn't relying on US Dollars as much as it used to. And there are a couple of reasons for that. U.S. treasury bonds aren't as risk free as they used to be given a ballooning deficit. But also the Russia Ukraine war.

[Adrienne Ma]

Yes, after Russia invaded Ukraine, the US and its allies froze Russia's bank accounts. Now some politicians in the US and amongst its allies want to take those Russian bank accounts all together and use the money as loans to Ukraine. And so, in short, Campbell says the U.S. and its allies weaponized the dollar.

[Campbell Harvey]

Many countries noticed, in particular China. So if you look at central bank purchases, it's no surprise that the leading buyers of gold are Russia and China. So they're building reserves and this is important in terms of the gold market dynamics.

[Adrienne Ma]

So buyer number one causing this modern day gold rush is central banks. In particular, Campbell says Russia and China are two top central banks doing this. They want something valuable that other countries can't easily take.

[Darian Woods]

Okay, so on to reason number two for gold's run. And you may not expect this one, its insurance companies.

[Campbell Harvey]

In China, insurance companies need to hold safe assets. If there are claims they need to pay out. So what's very interesting to me is that China changed the regulations for their insurance companies to allow the insurance companies to hold up to 1% of their reserves in gold. That represents $27 billion of buying.

[Darian Woods]

Okay, to our final reason, and this is something we'll call speculative buyers. Speculators often come out for a gold rush. Some are diversifying away from stocks and bonds, looking for safety if the market goes down.

[Adrienne Ma]

But some of those speculators are betting on something tied to the 2008, 2009 financial crisis. Specifically a rule change that was put in place to sober up commercial banks. So they didn't make the same mistakes. Again, we're talking about Basel iii. That's a set of rules for banks across the world.

[Darian Woods]

Yeah. A bunch of central banks got together and said, commercial banks, you've been very bad. You need to change your behavior. And these rules include the types of assets that commercial banks can keep and the risks they can take with other people's money.

[Adrienne Ma]

We have done a show on Basel iii. If you want to learn more, we will link to that in the show.

[Darian Woods]

Notes these rules are being rolled out very slowly over many years. And one rule that gold advocates are pushing for is to consider the metal as a high quality liquid asset.

[Campbell Harvey]

And the idea is that banks need to hold a certain amount of safe assets to cover a stress test. So think of this as a situation where there are significant withdrawals.

[Adrienne Ma]

The banks need to hold assets they can easily sell to cover bank runs.

[Darian Woods]

A U.S. treasury bond, for example.

[Campbell Harvey]

So the talk is that, well, why not add some gold? Especially given the US situation with a $37 trillion debt, a structural deficit, the weaponization of the US dollar. So why not diversify these safe assets and include gold?

[Darian Woods]

Right now it's speculation, but if this potential rule change turns into reality and commercial banks can buy gold to back up their deposits, Campbell thinks it would be a big deal.

[Campbell Harvey]

And if we assume that there is a, like a 5% allocation to gold, which is not unreasonable to start with, that would cause a demand shock that would dwarf what happened when the ETFs on gold were introduced.

[Adrienne Ma]

The launch of these gold exchange traded funds in the early 2000s allowed everyday people like you and me to buy gold like stocks. We don't have to visit coin shop or call 1-800-Numbers even though those commercials.

[Darian Woods]

On late night TV are pretty fun to watch.

[Adrienne Ma]

That's true. I hope they don't go away.

[Darian Woods]

Now, two ETFs hold about $180 billion worth of gold. And these funds actually have to hold on to physical bullion that people trade in their investment accounts.

[Adrienne Ma]

So some investors are hoping for another demand shock coming down the road. Though right now that change is just speculation.

[Darian Woods]

And we have these three groups of buyers. They're impacting the price a lot because the amount above ground is relatively small.

[Adrienne Ma]

So this is a fact that just is so memorable. All the gold that's been mined throughout history can fit in about three Olympic sized swimming pools.

[Darian Woods]

Enough for Scrooge McDuck to dive into, but not so much for the rest of the world. Darian. Yes, and these mining companies can't easily find more gold.

[Campbell Harvey]

The supply of gold, which is the new mining supply, is very insensitive to prices. So even though prices have gone up dramatically, the mining production has not gone up.

[Darian Woods]

Add those bets to institutional money buying up a desirable limited asset, and you've got the bull run we're seeing today.

[Adrienne Ma]

The question now is if this run can last. Is this time different?

[Darian Woods]

Because over very long periods of time, not years or even decades, but centuries, the value of gold is actually relatively stable.

[Campbell Harvey]

We obtained data on what Roman centurions were paid 2,000 years ago, and it's remarkable. In gold, they were paid 38 ounces a year. And that translates today to the wage of a U.S. army major.

[Adrienne Ma]

So that amount of gold they would get paid is worth around $140,000 today. It's pretty spot on for a 2,000 year currency measurement. And that means that the long term real return of gold, as in what it's worth after stripping away inflation, is roughly zero.

[Darian Woods]

So two things are true. The price of gold is relatively stable in the long term, like centuries. But gold can go up and down a lot over shorter periods of time. So let's recap what's causing the gold boom. It's a wave of new buyers from foreign central banks to China's insurance industry to speculators betting on a potential rule change for commercial banks.

[Adrienne Ma]

Is it going to last? Who knows? As Campbell believes, this is a significant economic shift that we're seeing. It all depends on things like whether de dollarization continues and I suppose, Basel iii.

[Darian Woods]

I think I'm gonna make a trip to Costco.

[Adrienne Ma]

You're gonna pick up a gold bar?

[Darian Woods]

No, I just need paper towels. Fair.

[Adrienne Ma]

This episode was produced by Corey Bridges with engineering by Maggie Luthor. It was backtracked by Sierra Juarez. Cagan Cannon edits the show and the indicator is a production of NPR Foreign.

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