Insights 
VT 
Central banks traditionally hold reserves in foreign currencies such as the US dollar, euro, Swiss franc, and British pound, alongside gold, in order to mitigate the risks of relying on a single currency.
Gold, in particular, is seen as a safe store of value, especially during times of economic uncertainty or weakness in dominant reserve currencies like the US dollar.
Rising gold prices often reflect market concerns about dollar volatility or instability in the global financial system.
Recent reports from the World Gold Council show a clear shift: central banks are increasing their gold purchases at the expense of their US dollar holdings.
This trend highlights mounting geopolitical and economic concerns and signals a significant structural change in global reserve management.
A Historic Shift: Gold Surpasses US Treasuries First Time in 30 Years
The pivot toward gold marks a fundamental transformation in the global monetary landscape. For the first time since 1996, central banks collectively hold more gold than US Treasury bonds, reflecting a deeper desire to diversify away from traditional, dollar-linked assets.
Gold now accounts for approximately 27% of total global reserves—the highest share in 29 years—while US Treasury holdings have declined to 23%, their lowest level since the 2008 financial crisis.
This reallocation reflects a dramatic change in how institutions view wealth preservation.
What’s Driving the Shift Toward Gold?
This shift didn’t happen overnight. Over the past decade, central banks have purchased around 3,500 tonnes of gold, pushing global reserves to approximately 36,500 tonnes—levels not seen since the 1970s.
Several key factors explain this surge in demand. One is the continuation of protectionist policies, such as the tariffs introduced by the previous US administration.
Another is the extended period of low interest rates, which has made gold a more attractive hedge against risk.
Additionally, the freezing of Russia’s foreign reserves by the G7 has prompted many countries to seek safer and more independent reserve assets. These events have reinforced gold’s role as a strategic, sovereign store of value.
Gold’s Role Expands Across Emerging and Developed Markets
The trend toward gold is not limited to emerging economies. Even advanced nations are now embracing gold as a more central component of their reserve strategy.
According to recent data, 73% of central banks expect the share of US dollars in their reserves to decline over the coming years, while gold’s share is set to rise.
In fact, 44% of central banks now report a structural shift in how they manage their gold reserves—up from 37% in 2024. This indicates growing interest in managing gold with greater flexibility and strategic intent, viewing it as more than just a passive asset.
Gold Prices Surge to Record Highs in 2025
Gold prices have reached historic levels in 2025, with the price per ounce climbing to $3,600—an increase of over 28% year-to-date. This follows a 26% rally in 2024. With central banks continuing to increase their gold holdings, the upward momentum looks set to continue.
The growing appetite for gold reinforces its role as a cornerstone of the global financial system and as a strategic reserve asset in uncertain times.
What to Expect in Q4: Policy Shifts, Inflation, and Market Volatility
As the fourth quarter unfolds, central banks are preparing to close the year with major decisions on interest rates.
The global financial environment remains active yet volatile, influenced by inflation indicators and robust domestic growth in several economies, which in turn supports risk-on sentiment.
We are also seeing a divergence in central bank strategies. Some regions are beginning to ease monetary policy, adopting a more accommodative stance, while others remain neutral or face political pressure.
A few are even expected to raise rates again, creating uncertainty in currency, equity, and bond markets.
All eyes remain on the US Federal Reserve, whose decisions continue to carry global weight. Its actions will be closely followed by central banks in Japan, the Eurozone, and the UK—countries whose currencies make up half of the ten most-traded in the world.
What Does This Mean for USD, EURUSD, and GBPUSD?
The shift in central bank reserves away from US Treasuries and towards gold signals a broad decline in global demand for US dollar-denominated assets.
While this is a structural trend that unfolds over the long term, the short-term effect can create selling pressure on the USD, particularly if paired with softer Fed guidance or narrowing yield differentials.
In currency markets, this dynamic could provide upside support for EURUSD and GBPUSD, especially as the euro and pound benefit from hawkish tones from the ECB and Bank of England, or increased safe-haven flows into gold-backed currencies.
If the Fed begins to pivot or lean more dovishly—while central banks continue accumulating gold and diversifying out of the dollar—this could push EURUSD back above key psychological levels, such as 1.10, or see GBPUSD retest recent highs above 1.29.
Traders should monitor USD positioning, central bank commentary, and gold flows, as they can act as early signals for shifts in macro sentiment and FX momentum.
As investors prepare for the final major week of central bank meetings in 2025, decisions by 22 central banks—collectively representing at least 40% of global GDP—will shape borrowing costs and investment flows heading into the new year.
