What central banks actually do

Central banks have three primary jobs: set short-term interest rates, act as lender of last resort, and manage the currency and reserves of the state.

The interest rate channel

By moving the policy rate, central banks influence the cost of borrowing across the whole economy. This is the most powerful and most watched lever.

The balance sheet

Since 2008, central banks have added a second lever: buying government bonds and other assets directly (QE) to inject liquidity or ease financial conditions.

Why gold cares

Central bank reserves increasingly include gold. Since 2022, official-sector buying has been the single largest driver of physical gold demand.