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EUR falls behind gold in reserve dominance race
The euro has slipped behind gold in the race for reserve dominance as central banks are increasingly turning to the precious metal.
According to the European Central Bank, gold has now become the second most significant reserve asset for central banks, attracting investors who view it as a safe haven during times of geopolitical uncertainty.
The ECB attributes this to the record-high purchases and surging prices that have propelled gold into this position. In 2024, gold bars made up 20% of global official reserves. By comparison, the US dollar accounted for 46%, while the euro accounted for just 16%.
The recent surge in gold prices has been driven largely by escalating trade tensions between the United States and China, prompting many investors to seek shelter in the precious metal as the ultimate safe-haven asset. The global trend toward de-dollarization has further fueled this demand.
The ECB notes that global central bank gold holdings have climbed to near post-war record levels. Current reserves are approaching those of 1965, when gold holdings peaked at 38,000 metric tons.
Despite offering no yield and incurring high storage costs, gold remains highly attractive to investors thanks to its liquidity, immunity to counterparty risk, and protection from sanctions. Many central banks also view gold as a shield against rising geopolitical instability and mounting US sovereign debt.
The ECB adds that over the past three years, nations geopolitically aligned with China and Russia have expanded their gold reserves more aggressively than others.
Published 17 June 2025
© InstaFintech Group
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© InstaFintech Group
