Gold Returns to the Spotlight: Now the Second Most Important Reserve Asset for Central Banks

In a notable shift across global financial systems, gold has reclaimed a central role in the reserve portfolios of central banks. According to data from the European Central Bank (ECB), as of 2024, gold has become the second most important reserve asset—surpassing the euro in market value terms and standing just behind the U.S. dollar. This transition marks a strategic change in how central banks manage risk, navigate inflationary pressures, and hedge against growing geopolitical uncertainty.

Structural Changes in Global Reserve Composition

The chart above illustrates the composition of official global reserves by asset class from 1999 to 2024. Throughout most of this period, the U.S. dollar has maintained dominance, consistently representing around 60–70% of global reserves. The euro held the second-largest share, while gold and other currencies played smaller roles.

However, beginning around 2014–2015, the share of gold—measured at market prices—started to rise steadily. By 2024, it overtook the euro to become the second-largest reserve asset. This evolution signals not only a shift in portfolio preferences but also growing skepticism about fiat currencies and the long-term credibility of sovereign monetary policies.

Why Gold Is Regaining Ground

1. Heightened Geopolitical and Economic Uncertainty

Global tensions—including trade disputes, regional conflicts, and escalating U.S.-China rivalry—have led central banks to diversify away from politically exposed reserve currencies. Unlike fiat currencies, gold is a tangible, apolitical asset that is immune to sanctions, interest rate manipulation, or macroeconomic policymaking.

2. Inflation and Erosion of Trust in Fiat

The post-pandemic years, especially 2021 through 2023, saw unprecedented levels of monetary stimulus and fiscal spending across major economies. These policies triggered multi-decade highs in inflation, weakening public and institutional trust in the purchasing power of currencies like the dollar and euro. As a result, central banks increasingly view gold as a store of value that can withstand systemic shocks.

3. Strategic Shifts in Emerging Market Central Banks

Emerging powers such as China, Russia, and India have been pursuing a “de-dollarization” strategy—reducing their dependence on the U.S. financial system. Accumulating gold has become a cornerstone of this policy, especially amid concerns that dollar-based assets could be frozen or sanctioned. Over the past decade, these countries have been among the top net buyers of gold for official reserves.

Decline of the Euro and Other Currencies

The chart also reveals the gradual decline in the euro’s share of global reserves. Although the euro gained ground during its first decade, it has failed to maintain long-term momentum due to political fragmentation in the eurozone, sluggish growth, and inconsistent fiscal coordination.

Meanwhile, the category of “other currencies”—including the Japanese yen, British pound, Canadian dollar, and Swiss franc—has remained relatively stable but has not gained significant ground. These currencies remain relevant for diversification but lack the scale or liquidity to challenge the dominance of the dollar or the rising appeal of gold.

Outlook: Will Gold Continue to Gain?

Looking forward, the global monetary landscape suggests that gold’s role is likely to remain strong or even expand. Continued geopolitical risk, fears of future financial repression, and a lack of coordinated global monetary governance all serve to elevate the appeal of gold.

In parallel, as governments explore central bank digital currencies (CBDCs), ironically, some institutional players may double down on physical gold holdings as a hedge against digital centralization and cyber risks. Gold provides a non-digital, non-sovereign, and universally recognized fallback in a world becoming increasingly centralized and algorithm-driven.

Conclusion: A Return to Financial Fundamentals

Gold’s resurgence in central bank reserves is not a temporary trend—it reflects deep-seated concerns about the durability of current monetary frameworks. In an environment where trust is a premium commodity, gold serves as a timeless and trusted store of value.

While gold is unlikely to displace the U.S. dollar in terms of liquidity or trade utility, its reemergence as a core reserve asset signals a new chapter in central bank strategy—one anchored in diversification, sovereignty, and resilience.

The big question for markets and policymakers alike is whether this signals the beginning of a broader systemic realignment or merely a tactical hedge. Either way, the message from central banks is clear: gold is no longer just a relic—it’s a strategic asset for an uncertain world.