Gold has officially surpassed the euro as the second-most important reserve asset globally, behind only the U.S. dollar, according to the European Central Bank’s (ECB) annual currency assessment report published Wednesday. The surge in gold purchases and rising prices have propelled the precious metal to make up around 20% of global official reserves by the end of 2024, overtaking the euro, which holds 16%. The U.S. dollar remains dominant with a 46% share, though its influence continues to decline steadily.
Record Gold Purchases Fuel Reserves Growth
Central banks have been acquiring gold at an unprecedented rate, with 2024 marking the third consecutive year that global gold purchases exceeded 1,000 tonnes—double the pace seen during the 2010s. As of 2024, total official gold reserves are approaching historical highs, nearing the 38,000 tonnes held in the mid-1960s during the Bretton Woods era. In comparison, 2024 reserves stood at 36,000 tonnes.
The World Gold Council revealed that the largest buyers of gold last year included Poland, Turkey, India, and China, which together accounted for about a quarter of global gold purchases.
Gold Prices and Geopolitical Tensions Drive Demand
The ECB attributes the growing role of gold in global reserves to a surge in the metal’s price, which rose nearly 30% during 2024 and continued to climb in 2025, reaching a record high of $3,500 per ounce in April. This price rally has increased gold’s appeal as a store of value, particularly in uncertain economic and geopolitical environments.
The ECB also highlighted that rising geopolitical tensions, particularly following Russia’s full-scale invasion of Ukraine in 2022, have spurred central banks to diversify away from the dollar into gold. Historically, gold has been seen as a hedge against potential sanctions, and its demand has surged as nations seek to protect themselves from financial instability.
The De-Dollarization Trend and Diversification Strategies
A survey conducted by the ECB showed that two-thirds of central banks invest in gold for diversification purposes, while 40% view it as protection against geopolitical risks. The report also noted that countries with close geopolitical ties to China and Russia have significantly increased their gold holdings since late 2021, reflecting the broader trend of de-dollarization among many developing nations.
Furthermore, the analysis found that the long-standing inverse relationship between gold prices and real yields broke down in 2022, as central banks began accumulating gold to insulate themselves from risks associated with potential sanctions.
Geopolitical Risks to Shape Future Reserve Decisions
The ECB’s survey indicates that geopolitical factors are likely to continue influencing central banks’ gold holdings in the years ahead. A striking 80% of official reserve managers surveyed believe that geopolitical risks will be a key decision-making factor when it comes to gold allocation over the next 5 to 10 years.
As central banks shift their strategies in response to global tensions and economic uncertainties, gold’s position as a critical reserve asset is expected to remain strong, with its appeal likely to grow in the face of ongoing geopolitical and financial risks.
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