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Gold has officially overtaken the euro as the second-most held reserve asset by central banks, according to a recent report published by the European Central Bank (ECB). The shift follows a strong rally in gold prices throughout 2024 and reflects growing demand among central banks for assets perceived as stable and resilient.
The ECB reported that gold now accounts for approximately 19.6% of global central bank reserves, surpassing the euro, which remains steady at 15.9%, a level it has maintained since 2016. Despite this change, the U.S. dollar continues to dominate the global reserve landscape, representing 46.5% of total holdings. However, this figure reflects a gradual decline from over 60% in previous years.
The report attributed the growing preference for gold to a broader “rush to quality,” driven by gold’s reputation as a long-term store of value, a hedge against inflation, and a reliable performer during periods of financial instability. It also cited findings from the World Gold Council indicating that central banks view gold as an effective portfolio diversifier, particularly during times of geopolitical uncertainty.
Although de-dollarization was not listed as a primary motivator, the ECB acknowledged that geopolitical events—particularly the 2022 Russian invasion of Ukraine—played a significant role in reshaping global reserve strategies. The resulting climate of uncertainty has continued to elevate gold’s status in international finance.
Source: create.vista.com
Analysts believe the trend may have further room to run. Janet Mui, Head of Market Analysis at RBC Brewin Dolphin, was cited in the report suggesting that long-term geopolitical tensions and a growing desire among central banks to diversify reserve assets would likely support continued accumulation of gold, even if current price action shows signs of moderation.
In summary, gold’s rise to second place among global reserve assets reflects not only market performance but also deeper structural shifts in how central banks are managing risk, navigating volatility, and responding to a rapidly changing geopolitical environment.
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