The Voice News :Gold has overtaken the euro to become the second-largest reserve asset held by central banks worldwide, trailing only the U.S. dollar, according to a new report from the European Central Bank (ECB).
The shift reflects a combination of aggressive central bank purchases and a sharp rise in gold prices. Gold now makes up 19% of global official reserves, compared to 16% for the euro and 47% for the dollar, according to ECB data.
Central banks, especially from emerging and developing economies, have increased their gold holdings significantly in recent years, largely driven by concerns over geopolitical risks, inflation, and potential sanctions. The trend has pushed gold reserves close to levels not seen since the 1960s.
While gold has long been viewed as a hedge against volatility and economic uncertainty, analysts suggest the pace of central bank purchases may slow. According to Capital Economics’ Hamad Hussain, institutions “will probably continue buying gold, albeit at a slower pace than in the past couple of years.”
In the first quarter of 2025, central bank gold purchases dropped 33% compared to the previous quarter, with China’s buying activity notably declining, according to the World Gold Council and ING analysis.
Still, the long-term outlook for gold remains strong. Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, recently advised investors to maintain exposure to gold and hedge funds amid ongoing market instability. UBS sees potential for gold to reach as high as $3,800 per ounce.
The ECB notes that gold remains especially attractive to nations seeking to diversify away from the dollar and euro, particularly given current doubts about the dollar’s reliability as a safe-haven asset.
While demand remains high, the ECB emphasizes that future gold prices will depend in part on supply dynamics. If past trends continue, the growth in central bank demand could drive a corresponding increase in global gold supply.
