A significant shift in global central bank reserves has been confirmed.
According to a report released on Tuesday, gold has now surpassed US Treasury securities to become the largest central bank reserve asset worldwide, following years of accumulation by central banks and a near doubling of its price over the past two years.
The report states that by the end of 2025, gold accounted for 27% of total central bank reserve assets globally, up from 20% a year earlier.
Over the same period, the share of US Treasury holdings declined from 25% to 22%.
Understanding the Key Driver
The substantial increase in gold's share is primarily attributed to valuation effects.
Thanks to explosive price surges in both 2024 and 2025, the value of gold holdings has risen significantly, granting it a larger slice of the global reserve pie.
Despite reaching this important milestone, the report suggests this trend may not be sustainable in the long run.
It points out that gold has limitations as an official reserve asset compared to major fiat currencies, citing its high price volatility, lack of yield, and substantial storage costs when held physically.
Furthermore, the supply of gold is not perfectly elastic and cannot adjust seamlessly to changes in international liquidity demand.
Recent Market Turbulence and Price Drivers
After a dramatic two-year rally, the gold price hit a historic peak near $5,600 per ounce in January of this year.
However, the onset of conflict in the Middle East did not propel gold higher on safe-haven demand as might be expected.
Instead, the price has retreated substantially from its highs, with spot gold currently trading around $4,476 per ounce.
Key factors behind this decline include energy price shocks from the conflict pushing up inflation, and market expectations for more hawkish Federal Reserve policy under its new chair, potentially prioritizing balance sheet reduction over interest rate cuts, which weighs on dollar-denominated gold.
Additional selling pressure has come from investor profit-taking after the prior rally and some nations liquidating gold reserves for cash.
Wall Street's Heated Debate on the Outlook
The gold market's rollercoaster ride this year has investors closely watching its next move, prompting several major Wall Street firms to reassess their price targets.
Morgan Stanley led the downward revisions in late April, lowering its target for the second half of 2026 to $5,200 per ounce, citing a normalization of gold's inverse relationship with real interest rates as geopolitical friction delays Fed rate cuts.
JPMorgan Chase revised its 2026 average price forecast down to $5,243 per ounce, noting weak futures market activity and tepid ETF inflows.
ANZ reduced its year-end target to $5,600 per ounce and pushed back its $6,000 per ounce forecast to mid-2027, highlighting a market caught between geopolitical anxiety and inflation concerns.
Citi expressed a bearish short-term view, predicting a potential drop to $4,300 per ounce over the next three months if oil prices normalize and inflation fears ease, allowing real rates to rise.
However, Citi maintained a $5,000 per ounce target for the 6-12 month horizon, indicating it is not entirely pessimistic on the medium-term outlook.
Bullish Voices and Long-Term Structural Support
Not all institutions have turned negative.
Goldman Sachs remains bullish, forecasting a resumption of the rally by late 2026 with a target of $5,400 per ounce, supported by continued central bank buying and expectations for two more Fed rate cuts this year.
UBS recently trimmed its year-end 2026 forecast to $5,500 per ounce, citing headwinds from high US Treasury yields and a strong dollar, but still sees potential for a $1,000 rally from current levels.
The bank views gold as a hedge against the broader secondary effects of conflict, such as currency debasement and fiscal deficits, rather than a direct hedge against war itself.
UBS analysts also emphasized that structural trends like high government debt and global de-dollarization efforts will support gold's long-term appeal, recommending a strategic allocation of around 5% in diversified portfolios.
This "cautious short-term, optimistic medium-term" logic is a common theme among the recent Wall Street reassessments.
Taking an even bolder view, Wells Fargo has suggested a price target of $8,000 per ounce, based on the premise that the global economy is in a fourth "currency debasement" cycle where gold serves as the ultimate store of value.
In a more pessimistic scenario with less debasement momentum, however, its model suggests gold could fall to $4,000 per ounce by 2027.
In an extreme forecast, Canadian mining legend Pierre Lassonde predicted gold could reach $17,250 per ounce as it replaces the dollar as the final reserve currency, driven by extreme leverage, monetization of US debt, and inflationary pressures, a scenario he believes could unfold within three years.
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