El Salvador has acquired nearly $50 million worth of gold, marking its first purchase of the bullion since 1990. The central bank has added 13,999 ounces, bringing total holdings to 58,105 ounces, valued at around $207 million.
This acquisition occurs amidst a rise in gold prices, trading near record highs of approximately $3,600 an ounce, an increase of over 36% this year due to strong central bank demand. Analysts suggest this could stabilise El Salvador’s financial standing and provide reassurance to global partners given the volatility associated with Bitcoin.
Central Banks Increasing Gold Reserves
The country’s reserves saw an increase to $4.7 billion in July 2025 from $3 billion the previous year, with about $700 million still held in Bitcoin. Central banks worldwide have increasingly been purchasing gold, making it the second-largest reserve asset following the US dollar. Goldman Sachs has projected that gold prices could climb to $5,000 should this trend persist.
The signal for us is to favor long positions on gold through the coming weeks. We are seeing a continuation of a multi-year trend, as central banks set purchasing records back in 2023 and 2024, creating a solid floor for the price. With momentum strong and institutional demand high, buying call options on gold futures or related ETFs appears to be a sound strategy.
El Salvador’s move away from a pure Bitcoin strategy is a significant development for digital assets. For a country that was a pioneer in crypto adoption, this diversification signals a desire for stability over high-risk growth. This should make us cautious about over-exposure to Bitcoin, suggesting it may be prudent to buy put options as a hedge against a sentiment shift.
This global rush into gold by central banks is also a subtle move away from holding U.S. dollars. We saw this trend accelerate following the geopolitical tensions that began earlier in the decade, with non-allied nations building up their bullion reserves. Therefore, we should monitor for potential weakness in the dollar and consider trades that benefit from a declining U.S. Dollar Index (DXY).
Market Trends and Investment Strategies
The market is clearly distinguishing between gold as a stable store of value and Bitcoin as a volatile risk asset. We can see this in the options market, where implied volatility for Bitcoin derivatives has historically been five to ten times higher than for gold. This divergence supports strategies like a pairs trade, going long gold while shorting bitcoin, to capitalize on the flight to safety.
