For decades, London reigned supreme in the global gold market. Its vast over-the-counter (OTC) system, built on unallocated accounts, netted trades and trust in paper claims set benchmarks and kept most bullion circulating as a financial instrument rather than plain physical metal.

Today, the London Bullion Market Association’s (LBMA) gold price remains the global reference. But London is no longer the primary venue for most physical bullion transactions, as the physical settlement balance shifts from West to East.

The Shanghai Gold Exchange (SGE), working in close tandem with Hong Kong, is the heart of this transformation. Gold that once flowed freely through Western vaults and ledgers is now increasingly delivered, stored and held in Asia.

In recent years, Shanghai has emerged as one of the dominant hubs for the physical delivery and storage of gold. Persistent structural demand illustrates a clear preference for allocated, tangible ownership over leveraged paper exposure.

For much of the postwar period, gold rarely made headlines. Fiat currencies, supported by the institutional strength of Western central banks, dominated the international monetary system. Even the decoupling of the dollar from gold in 1971, the so-called Nixon shock, initially had a limited impact on gold’s valuation and demand.

Over the past two decades, and especially in recent years, the precious metal has staged a roaring comeback. Central banks, particularly in Asia, have become steady and significant buyers, accumulating hundreds of tonnes annually.

According to the World Gold Council (WGC), global central bank purchases reached 863 tonnes in 2025, the fourth-highest level on record. Total global demand was just short of 5,000 tons.

Historically, the global gold trade revolved around Western hubs. London dominated over-the-counter trading and custody, New York shaped derivatives pricing through futures markets and Zurich refined and redistributed physical metal.

Even as physical flows began gravitating eastward, pricing, clearing and legal infrastructure remained firmly anchored in the West.

That began to change in 2002, when China established the Shanghai Gold Exchange, introducing a delivery-based, renminbi-settled model centered on physical possession and domestic custody.

Unlike Western platforms, where unallocated claims often exceed the available bullion, the SGE-aligned trading system more closely aligns with metal held in vaults. This approach has reflected China’s broader push for financial sovereignty and a reduced reliance on dollar-based reserves.

This shift laid the groundwork for Shanghai’s rise, reinforced by Hong Kong’s role as a bridge between East and West. Hong Kong linked Western financial markets with growing Asian physical gold demand.

The 2008 global financial crisis accelerated demand for physical gold, particularly in Asia and the Middle East. Dubai emerged as a major refining, trading and redistribution hub, connecting African supply with Asian markets.

Russia developed a domestically anchored gold market focused on refining, custody and reserve accumulation. This strategy intensified after 2014, when Western sanctions accentuated the value of holding gold under national control.

Three-layered system

The global monetary system now operates across three partially decoupled layers.

The first layer is settlement and payments. This includes correspondent banking, payment rails and, increasingly, central bank digital currencies (CBDCs). Technology, geopolitics, and regulation are rapidly reshaping this transactional infrastructure.

The second layer consists of reserve assets, which store value and anchor trust. It includes foreign exchange reserves, gold and strategic commodities. Change here is slow, reflecting long-term risk assessments and balance-sheet strategy.

The third layer is reserve currency power, which coordinates global trade, finance and crisis response. It relies on deep capital markets, credibility and network effects built over decades.

Gold operates primarily in the second layer. Its resurgence does not directly threaten the dollar’s transactional dominance, but the weaponization of the dollar has begun to erode confidence in its role as the unquestioned global reserve currency.

This distinction between layers helps explain recent statements from Beijing. Chinese President Xi Jinping has called for the renminbi to evolve into a global reserve currency. He argued that China cannot become a true financial powerhouse without a widely used international currency supported by a strong central bank.

Currency cycles

History shows that reserve currencies rarely fall abruptly. The Portuguese real, Dutch guilder, French livre and British pound all declined gradually as their economic strength, fiscal discipline and geopolitical reach diminished.

The US does not face identical conditions today. Its financial markets remain dominant. But familiar symptoms of a currency in decline have emerged: chronic budget deficits, political polarization and expansive international commitments that strain its economic health.

The recalibration of the reserve asset layer is accelerating, alongside the emergence of CBDCs. While CBDCs promise faster settlement and greater payment sovereignty, they do not provide a neutral, system-agnostic store of trust beyond the issuing jurisdiction.

Gold fills that gap. When CBDCs fragment payment systems into sovereign digital zones, gold acts as a neutral reserve anchor. It bridges trust between systems that do not fully rely on one another. Most BRICS countries are exploring CBDCs and, to varying degrees, increasing their reliance on gold as a strategic reserve asset.

Gold’s return is less a challenge to the existing order than a stabilizing response to its gradual, layered evolution. It offers a timeless form of trust amid fragmenting trust and uncertainty.

Offshore systems

For decades, Western gold markets operated through financial abstraction rather than physical exchange.

Institutions such as the London Bullion Market Association and COMEX facilitated trading in instruments such as futures, unallocated accounts, ETFs and derivatives. It enabled trading volumes that far exceeded the underlying bullion.

This system thrived on opacity. Participants rarely knew how many claims existed on each ounce of gold, and few ever intended to take delivery. Offshore financial centers, including the Cayman Islands and Bermuda, entrenched this model through legal layering, regulatory arbitrage and so-called balance-sheet optimization.

Gold exposure became embedded in complex financial vehicles, disconnected from physical custody. But the forces now driving gold eastward, specifically eroding trust in financial neutrality, are undermining the offshore framework.

Central banks and sovereign investors increasingly treat gold as a safe-haven asset rather than a trading instrument. They now prioritize legal clarity and jurisdictional certainty over financial flexibility.

At the same time, the rise of CBDCs is making monetary transactions more traceable and programmable. As money grows more transparent, the disconnect between opaque gold structures and auditable payment systems is becoming untenable, especially for state actors.

The result is a shift away from unallocated gold and offshore paper claims, and toward clearly owned, physically allocated bullion held under unambiguous legal title. Storage is moving onshore or to trusted regional vaults in locations such as China and the Gulf, reducing gold’s reuse in financial markets and favoring dedicated, transparent custody.

Offshore centers will continue to serve private capital and financial intermediaries, but their centrality to the gold market will diminish. In an age of fragmentation, states are choosing clarity over complexity, and security and sovereignty over the opaque efficiency of the past.

Monetary zones

Gold’s return is not necessarily a prelude to a global monetary reset. There is no coordinated effort, at least not yt, to restore gold convertibility or abandon fiat currencies.

What is emerging instead is a world of overlapping monetary zones. Different regions rely on distinct combinations of payment rails, reserve assets and institutional trust. Gold acts as a bridge between these zones rather than a universal standard imposed upon them.

Western systems continue to emphasize legal-institutional trust and capital market depth. Eastern systems place greater weight on asset-backed credibility and insulation from geopolitical risk. Gold allows these systems to coexist without full integration.

Gold’s movement from West to East is a rational response to a world in which payment systems fragment faster than trust can be rebuilt. CBDCs are reshaping how money moves. Reserve currencies remain powerful, but less singular. Gold is reshaping how trust is stored: quietly, slowly and without ideology.

In a multipolar monetary system, gold does not circulate so much as it stabilizes. And that is why the precious metal is moving from West to East.

Jan Krikke is a former Japan correspondent for various media outlets, a former managing editor of Asia 2000 in Hong Kong and author of “Creating a Planetary Culture: European Science, Chinese Art, and Indian Transcendence” (2023).