Gold Surges as Central Banks Boost Reserves Amid Global Uncertainty

In a striking shift in global finance, gold has become the second most significant component of central banks’ currency reserves, surpassing the euro for the first time in decades. According to a 2024 report by the European Central Bank (ECB), gold now accounts for 20% of worldwide reserves, outpacing the euro’s 16% share. The US dollar remains dominant, holding a 46% share.

Central banks have intensified gold acquisitions, purchasing over 1,000 tonnes annually for the third consecutive year. In 2024, these acquisitions represented 20% of global gold production, double the average annual purchases from 2010 to 2020. According to the World Gold Council, the top gold buyers include India, China, Türkiye, and Poland.

The current gold holdings of central banks have reached 36,000 tonnes, approaching the levels last seen during the Bretton Woods era in the 1960s. Driven partly by soaring prices—up 30% last year and 27% more in 2024—gold has hit a historic peak of $3,500 per ounce.

Despite offering no yield and being costly to store, gold is increasingly favored for its resilience to sanctions and independence from counterparty risk. This trend reflects a broader move away from the US dollar, spurred by escalating American debt and rising geopolitical tensions. The Russian invasion of Ukraine in 2022 further accelerated de-dollarization, as countries facing Western sanctions sought refuge in gold.

The ECB highlighted that in half of the top ten annual increases in gold reserves since 1999, sanctioned nations were the main contributors. A survey of 57 central banks showed that fears over the global financial system and political instability are the main motivators behind these purchases.

The ECB concluded that if this momentum continues, it may drive increased gold supply in the future.