In a quiet but powerful move, gold has overtaken the euro to become the second-largest reserve asset held by central banks, after the US dollar. This shift reflects a growing global focus on security, liquidity, and geopolitical neutrality — and signals important changes in the structure of international reserves.
A Changing Reserve Landscape
Latest data from the World Gold Council shows that gold now makes up about 20% of global central bank reserves, while the euro has slipped to around 16%. The US dollar, though still dominant at 46%, has seen a slow decline over the past decade.
As Reserve Bank of India (RBI) Governor Shaktikanta Das put it recently: “Gold continues to play a critical role in diversifying reserves and ensuring stability in external sector management.”
This is more than a trend — it’s a strategic realignment.
Why Are Central Banks Buying More Gold?
1. Record Purchases
2022 marked the largest gold-buying spree by central banks in over 50 years. That pace didn’t slow — over 1,050 metric tonnes were added globally during 2023 and 2024. China, Turkey, India, Poland, and Russia led this charge. India’s RBI alone added over 24 tonnes in this period, strengthening its reserve profile.
2. Geopolitical Hedge
With rising financial sanctions and currency-related risks (e.g. SWIFT restrictions on Russia), central banks are seeking assets free of political influence. Gold, as a neutral, zero-default asset, provides security that currencies can’t always guarantee.
Finance Minister Nirmala Sitharaman highlighted this in a recent policy note: “Strategic holdings like gold are vital to safeguard our financial autonomy in an unpredictable global environment.”
3. Inflation and Fiat Concerns
As inflation lingers and real rates fluctuate, gold offers a reliable store of value — especially crucial for emerging markets that face external debt risks and volatile import costs.
What This Means for the World
Portfolio Diversification-Central banks are sending a clear signal: gold isn’t just a hedge — it’s becoming a strategic asset class for long-term stability.
De-Dollarization -While the dollar remains dominant, this gold shift underlines a growing preference for a multipolar reserve structure.
Policy Signals-Countries seeking financial resilience will likely continue increasing gold reserves through 2025 and beyond.
The Road Ahead
The rise of gold to the second-largest reserve asset reflects deeper changes in global finance. As central banks hedge against currency risks and geopolitical tensions, gold’s timeless value shines through stronger than ever.
For investors, wealth managers, and policymakers, the message is simple:
Gold is no longer just a hedge — it’s a core reserve asset.
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