Gold has officially overtaken the Euro as the world’s second-largest reserve asset, according to a recent European Central Bank (ECB) report. This marks a pivotal ECB gold reserve shift driven by central banks seeking stability amid global uncertainty. While the U.S. dollar remains dominant, its lead continues to shrink.

Gold Rises as a Trusted Store of Value

Gold now represents 19.6% of global central bank reserves, surpassing the euro, which holds 15.9%, the ECB confirmed. This climb in gold’s status follows its impressive 2024 rally, driven by heightened demand for safe-haven assets. Meanwhile, the U.S. dollar’s share fell from over 60% in 2016 to just 46.5% today.

The ECB notes that this transformation reflects a global “rush to quality,” with the asset seen as a hedge against inflation, an effective crisis-time performer, and a reliable portfolio diversifier. Notably, the share of euros in global reserves has remained relatively unchanged since 2016, highlighting gold’s rising appeal.

 

The World Gold Council’s poll cited in the ECB report reveals that central banks favor gold due to its long-term value preservation, especially during periods of geopolitical tension. The trend accelerated after Russia’s full-scale invasion of Ukraine in 2022, according to the ECB.

Geopolitical Risks Fuel Ongoing Demand for Gold

Although some analysts predict a cooling in gold’s price momentum, long-term demand looks resilient. Janet Mui, CFA at RBC Brewin Dolphin, emphasized that persistent geopolitical uncertainty and diversification needs will likely keep its accumulation strong among central banks.

As global markets continue to navigate economic volatility and shifting alliances, the ECB gold reserve shift underscores a growing preference for assets that offer security beyond traditional currencies.

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