In a historic shift, gold has overtaken U.S. Treasuries as the largest share of foreign reserves held by central banks worldwide, according to a recent report from the European Central Bank (ECB).
Gold's Rise to Dominance
Bullion's share in official reserves climbed to 27 percent at the end of 2025, while U.S. Treasuries dropped from 25 percent to 22 percent. This change reflects a broader move by central banks to diversify holdings and hedge against geopolitical risks, as stated by ECB President Christine Lagarde.
“Geopolitical tensions continue to drive strong central bank demand for gold,” Lagarde wrote in the report.
Price Surge Fuels Gold's Ascent
Much of gold's rise is attributed to its dramatic price increase over the past two years. Gold prices surged 30 percent in 2024 and 60 percent in 2025, reaching a peak of US$5,500 per ounce in January 2026. Without this price rally, gold's share would have been similar to the euro and below Treasuries, noted Kieran Tompkins, an economist at Capital Economics.
However, central banks' voracious appetite for gold has also played a key role. Between 2022 and 2024, central banks purchased over 1,000 tonnes annually. While purchases eased to about 850 tonnes in 2025 due to high prices and rising holdings, they remain above historical levels.
Global Holdings Near Bretton Woods Peak
The world's central banks now hold more than 36,000 tonnes of gold, approaching the peak of the Bretton Woods era when the U.S. dollar was pegged to the metal, according to the Financial Times.
Tompkins highlighted that the ECB report signals sustained strong demand for gold, as geopolitical risks remain a key concern for many central banks. Buying has been concentrated in regions with higher threats of conflict.
Top Buyers of Gold in 2025
- Poland: approximately 100 tonnes
- Kazakhstan
- Brazil
- China
- Turkey
Private investment demand also surged, hitting nearly 2,200 tonnes in 2025—almost double the previous year. This was driven by record US$89 billion inflows into gold-backed exchange-traded funds (ETFs), which purchased about 800 tonnes.
Short-Term Price Outlook
Despite gold's rally, prices have fallen 15 percent since the start of the Iran war. Capital Economics expects further declines, from US$4,450 to US$3,500 per ounce by the end of 2026, as speculative fervor unwinds.
