Gold Passes Euro As Second-Largest Global Reserve Asset: ECB

In the latest indication of gold’s rising prominence in international finance, the yellow metal has surpassed the euro as the world’s second-largest reserve asset, a European Central Bank analysis of year-end 2024 holdings has found. As the year ended, the US dollar represented 46% of central bank reserves, followed by gold at 20%, the euro at only 16%, while all other currencies collectively accounted for 18%. It’s important to note this may understate the actual gold share, given the secrecy shrouding central bank gold-buying activity. 

Doubling their previous pace, central banks bought more than a thousand tons per year in 2022, 2023 and 2024, putting their holdings at their highest level since the late 1970s, as measured by weight, and close to the all-time high established in 1965. The current pace of central-bank and sovereign-wealth-fund purchases roughly equals a quarter of mined production.  

The ECB report attributes the trend in part to one of the biggest geo-political developments of recent years. “Gold demand for monetary reserves surged sharply in the wake of Russia’s full-scale invasion of Ukraine in 2022 and has remained high,” the researchers wrote.

Witnessing the freezing of Russia’s foreign-reserve assets and the broader weaponization of the US dollar, central banks have rationally sought to reduce their dollar reliance — particularly those in US-adversarial positions or more likely to land in that category. “In five of the 10 largest annual increases in the share of gold in foreign reserves since 1999, the countries involved faced sanctions in the same year or the previous year,” the report said. Of course, while the ECB won’t emphasize it, the reckless printing of Western fiat currencies to enable profligate government spending is another major factor. 

Gold’s 30% price surge in 2024 contributed to its second-place ranking as the year ended. However, its ascent has only continued since the timeframe of the ECB analysis, rising another 27% and approaching $3,500 per ounce. With buyers increasingly turning to gold as a hedge against political risks — versus inflation risk — there’s plenty of reason to anticipate more upside, particularly in the wake of Israel’s brazen attack on Iran in violation of international law, including the targeting of senior military officials and nuclear scientists in their residences.  

“Given the strong run in gold prices, the momentum in gold buying could slow,” RBC Brewin Dolphin head of market analysis Janet Mui tells CNBC. “But on a long-term basis, the uncertain geopolitical backdrop and desire for diversification will support the accumulation of gold as reserves.” While central banks are important players, the ECB notes that 70% of demand for gold comes from non-sovereign investors and those using it for jewelry.