Gold is Second Largest Reserve Asset

Gold is now the second largest global reserve asset, according to a new study from the European Central  Bank (ECB). The report reveals that gold bullion comprised 20 percent of reserves held by central banks around the world at the end of 2024, having overtaken the euro, which accounted for 16 percent of global central bank reserves. Aggressive central bank buying and the dramatic increase in the gold price are responsible for the precious metal’s rise to become the world’s number two reserve asset.

The U.S. dollar remains the largest holding among central banks, comprising 46 percent of reserve assets. But its leadership position has diminished as countries with close relations to Russia have been “de-dollarizing” their reserves.

“Gold demand for monetary reserves surged sharply in the wake of Russia’s full-scale invasion of Ukraine in 2022 and has remained high,” the ECB said. 

Led by the United States, Group of Seven nations froze Russia’s foreign exchange reserves after the country’s invasion of Ukraine. That led some nations, particularly in the East, to aggressively buy gold and reduce their exposure to the U.S. dollar due to concerns about the potential weaponization of currency reserves.

“Countries that are geopolitically close to China and Russia have seen more marked increases in the share of gold in their official foreign reserves since the last quarter of 2021,” according to the ECB report. Among the largest buyers of gold in the past few years have been the central banks of Turkey, India, and China.