A new Global Public Investor (GPI) study from the Official Monetary and Financial Institutions Forum (OMFIF) reveals that global central banks and major public investors are gradually seeking to reduce their exposure to the US dollar while increasing allocations to gold and the euro.
Survey data from OMFIF, covering 90 public institutions including 74 central banks and 16 public pension and sovereign wealth funds, shows a net 4% of respondents plan to decrease their dollar exposure over the next 12 to 24 months. This marks the first net decline in plans to allocate to dollar-denominated assets since the long-term intention data was first compiled three years ago.
Despite this shift, the US dollar remains the world's dominant international reserve currency, accounting for 58% of the surveyed institutions' holdings, only slightly below the 60% recorded in 2025.
OMFIF indicates this year's report reflects a broader structural change rather than a temporary market trend. OMFIF is an independent think tank based in London, primarily serving global central banks and public institutional investors. The GPI report's analytical framework is based on a survey of 90 large central banks, public pension funds, and sovereign funds globally, which collectively manage over $10 trillion in assets.
The latest GPI report shows that, for the first time in the survey's history, a larger share of global central banks plan to reduce rather than increase their dollar holdings over the coming decade. This is the first instance since the GPI series began recording long-term intentions of reserve managers in 2023 where more central banks plan to decrease their dollar holdings over the next ten years than plan to increase them.
Concurrently, 82% of surveyed central banks hold physical gold, up from 71% the previous year, positioning gold as the clearest beneficiary asset in official reserves amid geopolitical risks and currency system uncertainty.
The OMFIF report states: "Public investors like sovereign wealth funds are not standing still, but nor are they acting recklessly. Instead, they are adjusting cautiously, testing new tools, diversifying where possible, and adhering to the principles that have always defined official investment: safety, liquidity, and long-term investment value."
Key Shifts in Reserve Management
The OMFIF study indicates that central banks globally are tilting their overall reserves towards gold and the euro. They continue to add to their gold holdings, with about 30% of surveyed institutions planning to increase their gold allocation further over the next one to two years, citing geopolitical risk protection as the primary reason.
Additionally, 61% of surveyed institutions expect the gold price to trade between $5,000 and $6,000 per ounce by June 2027. Only 28% believe current gold prices are too high to deter further buying.
Investment firm The Kobeissi Letter notes that global central banks are increasingly shifting sovereign reserve assets from the US dollar to gold to achieve portfolio diversification.
The survey also shows rising interest in euro allocations. Overall, 29% of institutions plan to increase holdings of euro-denominated assets over the long term. Furthermore, 55% of eligible central bank organizations indicated they would increase their euro-denominated reserve assets if the EU became a permanent issuer.
The US dollar is the only major global currency expected to see a net decline in allocation over the next 12-24 months, while the euro is listed as the most favored reserve currency for increases.
Beyond reserve allocation, the survey found that 89% of developed market central banks have implemented some form of AI-assisted tools, compared to 44% of emerging market central banks.
Market Performance and Outlook
Spot gold was trading at $4,155.63 per ounce on Tuesday, down 0.23% for the session. However, it still posted a significant weekly gain of 3.45%, though it is down 3.75% year-to-date, indicating recent weakness has interrupted its broader, longer-term uptrend.
The US Dollar Index (DXY) stood at 100.953, up 0.10% on the day. The index is up 2.77% year-to-date but has fallen 0.44% over the past five trading sessions.
Despite reserve managers slowly advancing diversification, analysts at Societe Generale, as reported, expect the US dollar to remain supported in the near term due to resilient US economic growth and expectations that interest rates will stay higher for longer. They forecast the DXY to reach 103.6 by the end of 2026.
Overall, the OMFIF report shows that central banks are not abandoning the dollar but are gradually expanding their reserve diversification strategies amid rising geopolitical risks and changing global market conditions.
Analysis of Gold's Trajectory
In the view of Wall Street giants like Goldman Sachs, the recent sharp decline in gold prices resembles a severe, bear market-like correction within a bull market, rather than a definitive end to the long-term gold bull trajectory.
The core pressure for the significant pullback in spot gold stems from a hawkish interest rate narrative combining high inflation, rising rate hike expectations, a strong dollar, and rising real yields. These factors explain why gold's safe-haven attributes temporarily failed: in a scenario where energy shocks push inflation higher, forcing the Federal Reserve to adopt a more hawkish stance, gold, as a non-yielding asset, is suppressed by both rising real yields and a strengthening dollar.
Goldman Sachs has lowered its year-end 2026 gold target from $5,400 to $4,900, as it no longer aggressively anticipates Fed rate cuts in 2026. However, it emphasizes that global central bank gold purchases, running at about 51 tons per month—triple the pre-2022 level—remain a powerful long-term bullish support for gold that has not completely vanished.
Senior strategist Bart Melek from TD Securities offers a more trading-oriented perspective: the gold price may first fall below $3,900 per ounce to complete a phase bottom in this bear market-style adjustment, before rebounding above $5,300 in 2027. The logic is that short-term oil prices and inflationary pressures are suppressing gold, but once post-Iran war inflation pressures ease, rates fall, and the dollar weakens, the "currency debasement trade" and the exceptionally strong buying force led by central banks will once again dominate gold market sentiment.
European asset management giant Barclays maintains its bullish price targets of $4,791 for 2026 and $4,900 for 2027, believing that the current price around $4,150, near fair value, has improved the risk-reward ratio for investors re-entering the market. Barclays notes that given the previously highly extended technical picture and significant overextension relative to macro factors (especially real rates), this gold correction is not surprising.
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