Gold reserves rise as central banks weigh dollar dependence

Central banks plan to reduce the dollar's share of their reserves for the first time on record, according to the Global Public Investor 2025 study by independent think tank OMFIF. The survey of 90 central banks, sovereign funds and state pension funds managing roughly $10 trillion found that those intending to cut dollar holdings over the next decade now outnumber those planning to add. A full 79% of respondents said the global monetary system is gradually becoming multipolar.

Gold takes centre stage

Gold is the asset of choice for reserve additions over the next two years. Already 82% of regulators hold it in their portfolios, and roughly a third of survey participants plan to increase their gold allocations in the next one to two years. Data from the World Gold Council show central banks bought a net 863 tonnes of gold in 2025. That is below three consecutive years of purchases above 1,000 tonnes, but almost double the 473-tonne annual average from 2010 to 2021. The metal already performs some functions of a reserve asset, the study noted.

Dollar dominance persists

Despite the shift in sentiment, the dollar retains a commanding position. According to the International Monetary Fund, the greenback accounted for 57.7% of official global reserves in the first quarter of 2025. That is down from above 70% in the early 2000s, but no other currency comes close. The Bank for International Settlements reports that the dollar is on one side of nearly 88% of all foreign-exchange transactions. And in SWIFT international payments, the dollar held a 50.5% share in December 2025, compared with 21.9% for the euro and just 2.7% for the Chinese yuan. By March 2026, the dollar's share had ticked up to 51.1% while the euro stayed near 21% and the yuan remained in the low single digits.

Alternatives face structural hurdles

The survey indicates nearly all institutions view the yuan as a useful diversification tool, but most acknowledge serious constraints. China's capital controls prevent full convertibility, and the yuan lacks the liquidity and market depth of the dollar. The euro, while larger, suffers from the absence of a unified fiscal policy and deep integrated capital markets in the eurozone.

"The key frontier runs deeper than simply rebalancing reserves," said Alexander Belov, an analyst quoted in the OMFIF report. "It requires the emergence of multilateral clearing, deep capital markets in alternative currencies, and a decline of the dollar's role in trade settlements, not just in reserves." Belov argued that current developments are confined to specific corridors and should be seen as risk diversification and reduction of sanctions exposure, not a true de-dollarization.

Geopolitical drivers and long-term evolution

The shift is driven less by economic calculus than by political risk. Sanctions on Russia and the uncertainty around US foreign policy have prompted many countries to question the safety of holding large reserves in a single currency or asset. OMFIF notes that geopolitical tensions and the unpredictability of US policy are now major factors for reserve managers.

Experts agree that a gradual reduction in dollar demand could increase volatility in the US Treasury market and boost interest in real assets such as gold. But a sudden break is unlikely unless a major financial crisis accelerates the process. As Belov put it, the critical indicator is not reserve composition but the currency used in international settlements. That remains overwhelmingly the dollar.

For now, the global financial system has no credible replacement for the dollar. Central banks are broadening their toolkit — adding gold, cautiously increasing yuan and euro exposure, and exploring smaller developed-market currencies. But the greenback's advantages — deep capital markets, high liquidity and a dominant role in trade — remain intact. De-dollarization, if it continues, will be evolutionary, not revolutionary.