MWE Correspondent
The world’s central banks are buying gold at a pace not seen in decades — a move that has propelled the precious metal to become the second-largest reserve asset globally, after the US dollar.
A new report released by the European Central Bank (ECB) in June revealed that gold now accounts for nearly one-fifth of official foreign reserves, marking its strongest position since the 1960s. But unlike in the past, the value of gold has skyrocketed, recently surpassing $4,000 per ounce, as countries seek to safeguard their economies against global instability and inflation.
According to the ECB report, gold and the euro each made up around 16.5 percent of global reserves in 2023. By mid-2024, gold’s share climbed to 19 percent, while the euro slipped to 16 percent. The US dollar, though still dominant, has seen a gradual erosion of its long-held supremacy, now standing at 47 percent of the world’s official reserves.
Gold’s allure stems from its reputation as a safe-haven asset — one that holds its value even in times of crisis. Central banks use it as both a financial shield and a stabilizer, drawing on their reserves to support national currencies during volatile periods.
Today, central banks make up nearly 20 percent of total global gold demand — double the figure recorded in the 2010s. The ECB report noted that developing economies are driving much of this growth, as many nations grow wary of financial sanctions and over-reliance on Western currencies.
Analysts trace the current gold-buying wave back to February 2022, when Russia launched its full-scale invasion of Ukraine. The war rattled markets, triggered global inflation, and pushed investors — including governments — to seek refuge in gold. That momentum has continued amid tensions in the Middle East, rising US debt, and changing fiscal policies in Washington.
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China has emerged as one of the most aggressive gold accumulators, steadily increasing its reserves each month. India and Turkey have also played a major role, ranking among the world’s top buyers.
However, some experts now warn that central banks may be nearing their upper limits. With prices at record highs, adding more gold could expose them to diminishing returns. The ECB has hinted that while interest in gold remains strong, the pace of purchases may soon slow as reserves become saturated.
For many central banks, gold’s resurgence reflects a deeper shift in how nations perceive financial security. The traditional confidence once placed in dominant currencies — particularly the US dollar and the euro — is gradually being replaced by tangible assets that are immune to political influence.
Still, this strategy comes with trade-offs. Holding gold means forgoing interest income that other investments could yield. Storage and security costs also remain significant concerns.
Yet, as long as global uncertainties persist, analysts say the world’s oldest form of wealth will likely continue to gleam in the vaults of central banks.
