Central banks worldwide are increasingly prioritising gold over the U.S. dollar in their reserve portfolios, marking a significant shift in global monetary strategies. This trend reflects growing concerns over the stability of fiat currencies and a desire for assets that offer long-term security and value retention.
Shift in Reserve Strategies
A recent World Gold Council (WGC) survey indicates that 76% of central banks anticipate increasing their gold holdings over the next five years, up from 69% the previous year. Conversely, nearly three-quarters of respondents plan to reduce their dollar-denominated reserves, highlighting a strategic move away from the U.S. dollarÂ
This shift is driven by several factors, including geopolitical tensions, inflation concerns, and the desire for diversification in reserve assets. Central banks are seeking to mitigate risks associated with holding large amounts of a single currency, especially one subject to fluctuations in value and political influence.
Gold’s Appeal as a Reserve Asset
Gold offers several advantages that make it an attractive option for central banks. Unlike fiat currencies, gold is not subject to the policies or economic conditions of any single country. It has a long history as a store of value and is widely accepted in international trade. Additionally, gold’s performance is often inversely related to the strength of the U.S. dollar, providing a hedge against dollar depreciation.
The surge in gold prices has further bolstered its appeal. As of late September 2025, gold prices reached a record high of $3,824.50 per ounce, a 45% increase from the beginning of the yearÂ
This appreciation has significantly enhanced the value of gold reserves held by central banks.
Implications for the U.S. Dollar
The growing preference for gold over the dollar in central bank reserves signals a potential long-term decline in the dollar’s dominance in the global financial system. While the dollar remains the world’s primary reserve currency, its share in global reserves has been gradually decreasing. According to the International Monetary Fund (IMF), the dollar’s share of global reserves fell to 56.32% in the second quarter of 2025, down from 56.44% the previous quarterÂ
This trend towards diversification reflects a broader move towards de-dollarization, with countries seeking to reduce their reliance on the U.S. dollar in international trade and finance. Factors contributing to this shift include trade tensions, economic sanctions, and the desire for greater financial sovereignty.
Outlook for Gold and Reserve Strategies
Looking ahead, central banks are expected to continue increasing their gold holdings as part of a diversified reserve strategy. The WGC survey found that 95% of central banks anticipate growth in global gold reserves over the next year, with 43% planning to raise their own holdingsÂ
This strategic shift underscores the importance of gold as a stable and reliable asset in an increasingly uncertain global economic landscape. For investors, this trend highlights the potential benefits of diversifying portfolios to include gold, aligning with the strategies of central banks that are positioning themselves for long-term financial stability.
In conclusion, the growing preference for gold over the U.S. dollar in central bank reserves reflects a significant shift in global monetary strategies. As central banks continue to diversify their holdings, gold’s role as a cornerstone of financial stability is likely to strengthen, influencing both institutional and individual investment decisions worldwide.
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