Gold is now the second-most held reserve asset on Earth, right behind the U.S. dollar, and has officially overtaken the euro, according to the European Central Bank in a detailed analysis published Wednesday.
Central banks loaded up on the metal through 2024, pushing total reserves to levels not seen since the mid-20th century. And they’re still holding more than 20% of the global demand for gold, up from around 10% just a decade ago.
The report explained that central banks piled into gold to protect themselves from inflation, currency pressure, and political blowback. Gold gives them something to fall back on that doesn’t rely on any single government. With inflation still unpredictable and tensions rising between global powers, banks have been dumping foreign currencies—especially euros—and turning to gold to buffer their economies.
Emerging markets dump currencies, move for gold
The ECB said gold is now more attractive to countries dealing with Western sanctions or threats of currency isolation. Developing economies are particularly worried about depending too much on the dollar and euro, so they’re moving away from Western currencies to avoid getting caught in global financial crossfire.
The buying really picked up after Russia invaded Ukraine in February 2022 because it triggered a storm of inflation and interest rate hikes, making gold suddenly look like the only safe bet, said the ECB.
The same fear and instability have continued through 2025. Markets are still shaky, especially with the U.S. under President Donald Trump swinging tariffs and trade rules unpredictably.
China has been the biggest buyer through all of this, with India and Turkey close behind. The data shows those three countries have led the charge to reduce their exposure to the dollar. They’ve used gold to build up a more independent reserve position. The result? Global gold prices have hit record after record, including new highs this year.
But that rally hasn’t been smooth lately. Over the last few months, prices have gotten more erratic. Investors and banks are reacting to rapid-fire changes in U.S. economic policy, especially around tariffs and trade. Even so, the long-term outlook hasn’t shifted much.
Banks start slowing down but don’t stop buying
Still, the pace is cooling. The World Gold Council, in a report analyzed by ING, showed that central bank purchases dropped 33% in the first quarter of 2025 compared to the previous quarter. China’s appetite has slowed the most. But the buying hasn’t stopped.
Ewa Manthey, a strategist at ING, wrote last month that “despite the slowdown, central banks are likely to continue to add gold to their reserves given the still-uncertain economic environment and the drive to diversify away from the U.S. dollar.” She added that banks still added about 30 tonnes of gold in the last six months alone.
Hamad Hussain, a commodities economist at Capital Economics, told CNBC that “the institutions have played a key role in the gold rally and will probably continue buying gold, albeit at a slower pace than in the past couple of years.” He added that many reserve managers still see gold as a backup against “fiscal, inflationary, and geopolitical risks,” especially with doubts creeping in over whether the dollar can stay the safe haven it used to be.
That sentiment was echoed earlier this month by Mark Haefele, chief investment officer at UBS Global Wealth Management, who told clients to “ensure portfolio diversification and hold sufficient exposure to gold and hedge funds.”
The ECB report said future prices will mostly depend on how much gold supply can keep up. It noted that gold supply in the past has been flexible, responding to rising demand with more above-ground stock. “Therefore, if history is any guide, further increases in the official demand for gold reserves may also support further growth in global gold supply.”
