Central Banks Accelerate Shift to Gold, Euro, and Yuan as Dollar Dominance Fades

Central Banks Accelerate Shift to Gold, Euro, and Yuan as Dollar Dominance Fades

A historic pivot in global reserve management is underway as central banks worldwide ramp up gold buying and diversify into the euro and Chinese yuan, signaling waning confidence in the U.S. dollar.

Summary
Central banks across the globe are dramatically increasing their gold reserves and exploring greater allocations to the euro and yuan. This strategic shift, driven by geopolitical instability and concerns about the long-term dominance of the U.S. dollar, is reshaping the architecture of international reserves and could have far-reaching implications for global finance.

Introduction
The USD has long maintained its status as the leading reserve currency worldwide. But a major transformation is now in motion. Recent surveys and data reveal that central banks are not only accelerating their gold purchases but are also looking to diversify their reserves with more exposure to the euro and China’s renminbi (yuan). This trend reflects a growing desire to mitigate risks associated with dollar concentration amid rising geopolitical tensions, inflation fears, and shifting global trade dynamics.

Record Gold Buying: The New Reserve Strategy
Unprecedented Pace of Accumulation
Central banks have added more than 1,000 tonnes of gold annually for three consecutive years, more than double the average annual purchase of 400–500 tonnes seen in the previous decade. According to the World Gold Council’s 2025 Central Bank Gold Reserves Survey, this aggressive accumulation is a direct response to mounting global uncertainty and the need for assets that perform well during crises.
Survey Highlights
• An all-time high of 95% of central banks surveyed anticipate an increase in global gold reserves over the coming year, compared to 81% in the previous year.
• 43% of respondents plan to increase their own gold reserves in the coming 12 months, the highest reading ever recorded.
• Not a single central bank surveyed anticipates reducing its gold holdings in the near term.

Why Gold?
Gold’s appeal lies in its historical role as a crisis hedge, its effectiveness in portfolio diversification, and its ability to counteract inflation. The asset’s performance during recent global crises has only reinforced its strategic value for monetary authorities.

The Dollar’s Waning Grip
Declining Dollar Allocations
Nearly three-quarters of central banks now expect their dollar holdings to decrease over the next five years, a significant jump from 62% last year. This marks a clear trend toward de-dollarisation as policymakers seek to reduce exposure to U.S. fiscal and political risks.
Geopolitical and Economic Drivers
• The aftermath of Russia’s invasion of Ukraine and subsequent Western sanctions have heightened awareness of the vulnerabilities associated with holding dollar-denominated assets.
• Trade protectionism, rising U.S. debt, and concerns over future policy unpredictability are also prompting reserve managers to look for alternatives.

Diversification: Euro and Yuan Gain Favor
Euro’s Steady Appeal
The euro remains the second-most preferred reserve currency. Central banks see it as a stable, liquid alternative, especially as the European Union continues to strengthen its financial infrastructure.
Yuan’s Rising Profile
The Chinese yuan is steadily gaining ground in global reserves. While still a small share compared to the dollar and euro, its inclusion in the IMF’s Special Drawing Rights basket and China’s growing influence in global trade are making it increasingly attractive for central banks looking to diversify.

Risk Management and Strategic Allocation
Active Reserve Management on the Rise
The share of central banks actively adjusting their gold holdings rose from 37% in 2024 to 44% in 2025. While boosting returns remains a key objective, risk management—particularly in the face of geopolitical shocks—has become a primary motivator.
Domestic Gold Storage Trends
Another notable shift is the increasing preference for storing gold domestically. The share of central banks choosing domestic storage rose from 41% in 2024 to 59% in 2025, reflecting a desire for greater control and security.

Implications for Global Markets
Gold Price Outlook
With central banks expected to continue their buying spree, the outlook for gold prices remains robust. The metal’s recent surge to record highs underscores its enduring appeal amid uncertainty.
Currency Market Dynamics
As allocations to the euro and yuan rise, their roles in international trade and finance are likely to strengthen, potentially reducing the dollar’s influence over time.
A New Era of Reserve Management
The ongoing diversification marks a fundamental shift in how central banks approach reserve management, with implications for global liquidity, exchange rate stability, and the future of international monetary relations.

Conclusion
Central banks are signaling a decisive move away from overreliance on the U.S. dollar, embracing gold and, increasingly, the euro and yuan as pillars of their reserve strategies. This transformation, driven by a complex web of geopolitical, economic, and financial factors, is setting the stage for a more multipolar global reserve system. As this trend accelerates, the world’s monetary landscape will continue to evolve, with gold at the center of this new era of diversification.

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