In early June, the European Central Bank reported that gold's share of total global official reserve assets had climbed to 27% by the end of 2025, surpassing U.S. Treasury holdings by 5 percentage points to become the largest single asset class in global official reserves.
Despite significant price volatility this year, data shows global central banks increased their gold reserves by 244 tonnes in the first quarter, a 3% year-on-year rise, indicating continued strong demand. Why are central banks around the world boosting their gold holdings, and how has gold become the largest official reserve asset?
What Makes Gold the Top Global Reserve Asset?
Experts point to gold's unique attributes, which distinguish it from reserve assets like sovereign bonds, as the core reason for its sustained accumulation by central banks in recent years.
Dong Ximiao, Chief Economist at Zhaolian, stated that gold, as a reserve asset free from sovereign credit risk, has no default entity and carries no counterparty risk, which is its most prominent advantage. By reducing U.S. Treasury holdings and increasing allocations to gold, which lacks sovereign credit risk, central banks can diversify away from single-reserve risks.
Experts note that the current wave of large-scale central bank gold buying began in 2022. Data reveals that from 2022 to 2024, global central banks were net purchasers of over 1,000 tonnes of gold for three consecutive years, with net purchases reaching 863 tonnes in 2025, far exceeding levels seen in prior years. Against a backdrop of heightened geopolitical tensions, gold's status as a globally recognized ultimate means of payment is a key reason for central banks' increased acquisitions.
Zhou Junzhi, Chief Macro Analyst at CITIC Securities Research Institute, explained that gold can serve as a backup payment method in extreme scenarios. As gold is a historically recognized form of money, institutions, including central banks, often increase their holdings amid growing uncertainty, playing a very significant role.
In interviews, experts suggested that gold's overtaking of U.S. Treasuries as the top reserve asset results from a combination of valuation effects and active central bank allocation.
Dong Ximiao elaborated that, from a valuation perspective, gold prices rose approximately 30% in 2024 and surged 65% in 2025, boosting the book value of existing gold holdings. Concurrently, rising U.S. Treasury yields led to a decline in the price of existing Treasury assets. This combination of one rising and the other falling enabled the reversal.
The Trend of Central Bank Gold Accumulation Likely to Persist
Gold's ascent to the position of the world's largest official reserve asset has drawn widespread market attention. Will the trend of central banks increasing their gold holdings continue? Further expert analysis provides insight.
Data indicates that the top five central banks in terms of gold purchases in 2025 were Poland, Kazakhstan, Brazil, China, and Turkey. Based on multiple assessments, the broad direction of increased gold holdings by global central banks is unlikely to change in the medium to long term.
Dong Ximiao cited a World Gold Council survey showing that over 90% of responding central banks expect to continue adding gold over the next 12 months, with 43% planning to increase their gold reserves within the year. Furthermore, 76% anticipate their gold reserve ratio will rise over the next five years, with emerging market economies showing a stronger willingness to add gold than developed economies.
Experts believe that even if gold prices fluctuate and its reserve share dips in the future, the core rationale for central banks to hold more gold—such as promoting reserve diversification and hedging geopolitical risks—will remain valid over the long term.
Zhou Junzhi added that with U.S.-Iran negotiations still ongoing and the short-term prospect of a reconciliation agreement remaining uncertain, central banks' gold-buying actions may persist for some time to prepare for such potential changes.
Sustained Central Bank Buying Amid Recent Price Declines
International gold prices have experienced sharp fluctuations recently, with the price falling below the $4,100 per ounce mark on the 10th. Many may wonder why gold prices have been declining steadily recently despite the clear ongoing trend of central bank accumulation. What factors are behind the price volatility, and how should ordinary investors respond?
Experts attribute the recent pronounced volatility in international gold prices to multiple factors.
On one hand, the consecutive sharp rallies in international gold prices during 2024 and 2025 built up significant correction pressure.
On the other hand, energy price increases triggered by Middle East geopolitical conflicts have raised inflation expectations. The market is anticipating that the Federal Reserve may respond with interest rate hikes, which directly suppresses gold's upside potential, creating a peculiar situation of "central banks buying against the trend while gold prices weaken in the short term."
Dong Ximiao explained that the market has begun pricing in the possibility of Fed rate hikes. Rising U.S. Treasury yields and a strengthening U.S. dollar have jointly capped gold price increases. This explains why, following the outbreak of conflict in the Middle East, the price of gold—typically a safe-haven asset—did not rise but instead fell sharply.
Regarding the gold investment concerns most pertinent to ordinary investors, industry experts advise against following speculative trends. Investors should control their position sizes based on their personal financial situation and risk tolerance, view price fluctuations rationally, and avoid the trap of buying high and selling low.
Zhou Junzhi cautioned that, particularly in the second half of 2026 and into 2027, the market will fully assess the negative impact of inflation and the resulting liquidity conditions on gold. Therefore, for those investing in gold, especially physical gold, it is crucial to fully recognize that the conditions and patterns driving gold prices in 2026 will differ from those in 2025.
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