At a gold shop in Deqing County, Huzhou City, Zhejiang Province, a staff member arranges gold jewelry.
The European Central Bank released a report on June 2nd stating that by the end of 2025, gold's share of total global official reserve assets had surged to 27% from 16% at the end of 2023, surpassing US Treasury holdings by 5 percentage points to become the largest asset in global official reserves.
According to the report, the top five central bank buyers globally in 2025 were, in order: Poland, Kazakhstan, Brazil, China, and Turkey.
For decades, US Treasuries have been the most crucial core asset in global official reserves. In the view of several institutions, gold's leap to become the world's number one reserve asset is primarily due to the rapid rise in its price, which has significantly increased the value of gold holdings.
Data shows that after a 27% increase in 2024, the London spot gold price surged by 65% in 2025, marking the largest annual gain since 1979. This means that even without considering central banks' active purchases, the valuation of existing gold reserves has already risen substantially.
The sustained and accelerated pace of gold purchases by global central banks over many years is also a key reason for the elevated status of gold reserves.
"Central banks' global gold purchases reflect efforts to enhance the resilience of their balance sheets," the ECB report stated. It noted that from gold first surpassing the euro to become the world's second-largest reserve asset in 2024, to overtaking US Treasuries in 2025, this shift is driven by both central banks' push for reserve asset diversification and considerations of hedging against geopolitical risks.
World Gold Council data shows that from 2022 to 2024, global central bank annual gold purchases exceeded 1,000 tonnes each year. Purchases in 2025 reached 863 tonnes, a significant increase compared to the annual average from 2010 to 2021. As of the end of March this year, total global central bank gold reserves reached 37,000 tonnes.
Why are global central banks, particularly those in emerging markets and developing economies, increasing their gold holdings?
Generally, reserve managers view gold as a portfolio diversification tool to hedge against economic risks—including inflation, economic downturns, and default—as well as geopolitical risks.
Liu Richeng, futures and spot trading manager at Shandong Energy Group, stated that gold's core safe-haven value stems from its scarcity-driven property of resisting currency devaluation and its unique advantages of having no sovereign credit risk and no counterparty risk. In extreme scenarios, gold can also hedge against monetary and macro-financial risks such as surging fiscal deficits. Furthermore, gold possesses good liquidity. An example of relying on gold's high liquidity to manage risk was seen in the first quarter of this year when the Central Bank of Turkey sold gold to obtain foreign exchange to support the lira.
Looking ahead, will the trend of central banks increasing gold holdings continue?
Compared to major fiat currencies, gold has some inherent limitations as an official reserve asset due to high storage costs, lack of yield, and inelastic supply. However, these disadvantages have not deterred central banks' favor for it. Joni Teves, a precious metals strategist at UBS, believes the trend of demand from central banks and other sovereign institutions for gold remains solid.
The World Gold Council believes that despite sharp gold price volatility this year, demand for gold purchases from global central banks has actually intensified. In the first quarter of this year, global central banks added 244 tonnes to reserves, a 3% year-on-year increase, above the five-year average level. It is estimated that global central bank gold purchases in 2026 will remain at a relatively high level, projected to be between 800 and 850 tonnes.
"As high US fiscal deficits exacerbate dollar credit risks, more and more countries are seeking to reduce their dependence on the US dollar. The strategic asset reallocation towards gold by global central banks is likely to continue," said Qu Rui, an analyst at Dongfang Jincheng. He added that simultaneously, the proportion of gold in the reserves of emerging market central banks remains lower than that of developed countries, indicating significant room for increased allocations.
Since the beginning of this year, after hitting a new high near $5,600 per ounce, the gold price has reversed sharply, experiencing multiple rounds of severe adjustments. Qu Rui cautioned that influenced by imported inflation from Middle East geopolitical conflicts, expectations for Federal Reserve interest rate cuts have weakened, US Treasury yields have risen, and the gold price has been suppressed. If the gold price continues to correct significantly, it may lower gold's share in global official reserves.
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