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Gold has overtaken the euro as the world’s second most important reserve asset for the central bank due to record purchases and rising prices, according to the European Central Bank.
Bullion accounted for 20% of the world’s official reserves last year, surpassing the euro 16% and data from the second ECB to the US dollar at 46%. Report The exhibition was opened on Wednesday.
“The central bank has continued to accumulate gold at a record pace,” the ECB wrote, adding that for the third consecutive year, the central bank acquired more than 1,000 tons of gold in 2024, winning two-fifths of the annual amount of the 10 years of the 2010s.
The gold inventory held by Central Banks around the world is nearing historic highs of the post-war Bretton Woods era. Until 1971, global exchange rates were fixed in the US dollar, allowing them to convert to gold at fixed exchange rates.
The central bank’s gold reserves, which peaked at 38,000 tonnes in the mid-1960s, once again reached 36,000 tonnes in 2024, according to the latest ECB count. “Central banks around the world hold about the same amount of money they did in 1965,” the ECB report states.
According to the World Gold Council, the largest buyers last year included India, China, Turkey and Poland.
The 30% rise in gold prices last year was one factor in a surge in the proportion of gold in global foreign reserves. Since the beginning of the year, gold prices have risen by another 27%, reaching a historic high of $3,500 per troy ounce.
“This stockpile, along with high prices, has become the second largest global reserve asset at market prices in 2024, after the US dollar,” the ECB said.
Gold is uninterested and expensive to store, but globally it is a very liquid, ultimate safe asset for investors, and is not subject to counterparty risks or sanctions.
In recent years, central banks have been trying to diversify away from the US dollar amid concerns about geopolitical instability and US debt levels. After Russia’s invasion of Ukraine, the trend of derailment accelerated, especially among developing countries, when the US targeted access to Russian financial markets.
The ECB report added: “Gold demand in financial reservoirs remains high, rising sharply following the 2022 Russian invasion of Ukraine.”
“Five of the 10 largest annual increases in foreign reserve share since 1999, countries involved faced sanctions the same year or the previous year,” the central bank’s analysis added that “countries that are geopolitical close to China and Russia” have swelled more to gold than others in the past three years.”
A study by 57 central banks that held gold last year revealed concerns about sanctions, anticipated changes in the global financial system, and the desire to not rely on the US dollar are driving forces in emerging markets and developing countries.
Furthermore, gold has historically been cheaper when real yields on other assets rose, but this long-standing correlation has collapsed since early 2022, attracting investors to gold as a hedge against political risk rather than inflation.
The ECB said gold supply has increased during high-price periods in recent decades. “If history is a guide, further increases in the official demand for gold reserves could support further growth in global gold supply.”
