Driven by surging prices and aggressive central bank purchases, gold has officially overtaken US Treasury securities to become the world's largest reserve asset for the first time in three decades. This marks a symbolic moment for the global financial system, highlighting a rapid shift of capital into safe-haven assets amid growing concerns over fiscal sustainability and heightened geopolitical risks.
According to the latest data from the World Gold Council (WGC), assuming central banks' gold holdings remain unchanged by year-end and valued at year-end prices, the value of global official gold reserves held outside the US has reached $3.93 trillion. This figure officially exceeds the value of long-term and short-term US Treasury securities held by foreign official institutions, which stood at nearly $3.88 trillion as of October. The last time foreign institutions held more gold than US Treasuries dates back to 1996. This structural shift not only reflects the strong rally in gold prices but also reveals a deeper realignment in the allocation of global reserve assets.
This reversal coincides with gold's robust performance during the year-end rally and at the beginning of 2026. Following a nearly 70% gain in 2025, gold extended its upward trend in the first week of 2026, briefly touching $4,500 and holding near that level, with a weekly increase of 3.6%. Persistent geopolitical tensions continue to bolster its appeal as a safe-haven asset.
Analysts point out that this signifies a fundamental change in the structure of global reserve holdings. Joe Kalish, Chief Macro Strategist at NDR, noted that as trust in fiat currencies diminishes, the value of gold reserves held by non-US countries is rapidly catching up to and ultimately surpassing their holdings of US Treasuries. This trend indicates a reduction in countries' exposure to the US financial system, driven by concerns over potential dollar depreciation and the risk of asset freezes or sanctions under a possible Trump administration.
Despite gold trading at elevated levels, central banks have not ceased their accumulation of gold reserves. Data from the World Gold Council shows that the total amount of official gold reserves held globally outside the US has exceeded 900 million troy ounces. This persistent buying behavior signals that policymakers are placing increasing strategic importance on gold as a core reserve asset.
For analysts, this phenomenon represents a structural transformation in global reserve holdings. Compared to traditional fiat currency assets, gold is perceived as a safer alternative devoid of counterparty risk. Kalish stated in a research report, "When I first discussed this topic three months ago, the gap was still significant. Now, based on estimates and current prices, that gap has vanished."
Over the past four years, foreign central banks have accelerated their gold purchases, aiming to shield themselves from potential negative spillover effects of US geopolitics. JPMorgan warned in a report last year that increasing domestic polarization in the US could jeopardize its governance capacity, thereby undermining the foundation of the US dollar as a global safe-haven asset, a trend that is accelerating the so-called "de-dollarization" process.
While the ascendance of gold's reserve status is largely attributable to last year's substantial 66% price surge, there is still debate regarding its future price trajectory. Gold's long-term performance hinges on multiple factors, including US monetary and fiscal policies. A low-interest-rate and high-inflation environment typically enhances gold's attractiveness, while the US dollar's performance and the sustainability of central bank buying sprees are also key variables.
Currently, Wall Street is divided in its outlook for gold. Most institutions maintain an optimistic view on prices, with UBS Group recently upgrading its rating on gold to "overweight." This camp believes that in the face of potential governance risks and fiscal uncertainty, foreign governments are increasing their gold allocations to hedge risks, viewing this asset rotation as a defensive adjustment to the existing US dollar-dominated global financial architecture.
However, a minority of institutions hold a contrary view. Capital Economics anticipates gold prices will weaken in 2026. The firm's analysis suggests that "the recent frenzied rally in gold prices has been primarily driven by retail investment demand in the West, which could quickly fade." Capital Economics specifically noted that if its prediction—that the Federal Reserve will implement smaller interest rate cuts than market expectations—proves correct, gold prices could face downward pressure. Indeed, as investors took profits, gold prices experienced a degree of pullback on Wednesday.
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