Central Banks to Boost Gold Reserves, Cut Dollar Holdings Amid Geopolitical Shifts

Global central banks are signaling a decisive shift in their reserve strategies, with gold emerging as the preferred safe-haven asset. According to a recent survey by the World Gold Council (WGC), a growing number of central banks plan to increase their gold holdings over the next five years while expecting a continued decline in dollar-denominated reserves.

Gold's Rise as the Reserve Asset of Choice

The survey, conducted between February 25 and May 20, garnered responses from 73 central banks. The key findings reveal a deepening reliance on gold:

• 76% of respondents expect their gold holdings to increase over the next five years, up from 69% in 2023.

• 95% believe global central bank gold reserves will grow in the next 12 months, a record high from the 81% recorded last year.

• Nearly three-quarters foresee a drop in dollar holdings, compared to 62% the year before.

This shift is taking place despite gold reaching record levels—$3,500.05/oz in April, marking a 95% surge since the start of the Russia-Ukraine war in 2022.

Why Central Banks Are Accumulating Gold

The WGC highlights three key drivers for this global trend:

1. Crisis Resilience: Gold's historical role as a hedge during geopolitical tensions and financial crises.

2. Diversification: Reducing overreliance on fiat currencies, particularly the U.S. dollar.

3. Inflation Protection: Gold's performance during periods of high inflation continues to appeal to policymakers.

Over the last three years, central banks have acquired more than 1,000 metric tons of gold annually—a sharp increase from the 400-500 ton average seen over the previous decade.

Changing Reserve Strategies in a Fractured World

The backdrop of this accelerated accumulation is increasingly fragmented geopolitics and growing distrust in traditional reserve currencies. The U.S. dollar, while still dominant, is losing appeal in the eyes of many central banks, particularly those in emerging markets seeking to insulate themselves from Western financial sanctions.

Additionally, the Bank of England remains the most preferred vault for central banks to store their bullion, indicating that while portfolio preferences may shift, institutions still value robust security and legal frameworks.

Looking Ahead

If these expectations hold, the next five years may witness a structural reshaping of global reserve compositions. Gold, already performing strongly in 2024 and 2025, may remain underpinned by not just retail or institutional demand, but sustained central bank buying.

To analyze gold's price movements and fundamentals over time, see:

• Commodities

• Cryptocurrency Daily (if covering the shift in alternative reserves)

This evolving trend reaffirms gold's enduring status—not just as a store of value, but as a core element of monetary strategy in an uncertain world.