Theme of the Day: Central banks plan to boost gold reserves and trim USD holdings

Central banks expect to keep buying more gold this year and anticipate their holdings of USDs will fall over the next five years, according to a survey of global monetary authorities by the World Gold Council. Geopolitical concerns, sanctions risk and worries about the status of the USD have driven global central banks to make record purchases of bullion. Gold recently overtook the euro to become the world’s second-largest reserve asset, behind the USD.A record 95% of respondents to the survey expect global central banks’ gold holdings to increase over the next 12 months, the highest level since the annual poll started in 2018. Meanwhile three-quarters of respondents expect central banks’ USD holdings to decline over the next five years. More than 70 central banks responded to the industry body’s survey. Shaokai Fan of the WGC said: “The sentiment is very strong, certainly there’s more confidence among central banks that the entire universe of central banks is going to buy, and that their own central bank might buy.”Gold’s performance during times of crisis, portfolio diversification and inflation hedging are some key themes driving plans to accumulate more gold over the coming year. In addition, gold’s unique characteristics and role as a strategic asset continue to be valued by central banks: its performance in times of crisis, ability to act as a store of value, and its role as an effective diversifier, continue to be cited as key reasons for an allocation to gold.The majority of respondents (73%) see moderate or significantly lower USD holdings within global reserves over the next five years. Respondents also believe that the share of other currencies, such as the euro and renminbi, as well as gold, will increase over the same period.The survey highlighted an uptick in respondents who actively manage their gold reserves, from 37% in 2024 to 44% in 2025. While enhancing returns remained the primary reason for this, risk management leapfrogged tactical trading as the second most selected reason.The Bank of England remains the most popular vaulting location for gold reserves amongst respondents (64%); a significantly higher percentage of respondents reported some domestic storage of gold reserves this year than they did last year (59% in 2025 vs 41% in 2024). Just 7% of respondents indicated that they plan to increase domestic storage of gold reserves over the next 12 months.Gold also has downsides as a reserve asset, including the storage costs and the inconvenience of transporting it.