Central Banks Ditch Dollar for Gold Amid Geopolitical Uncertainty

Central banks are shifting their reserve allocations away from the US dollar and towards gold, according to new surveys. The Official Monetary and Financial Institutions Forum (OMFIF) found that more central banks plan to reduce their exposure to the dollar over the next decade than increase it.

This marks a significant shift in the global financial system, which has been dominated by the dollar for decades. Despite this, reserve managers still view the US currency as the safest and most liquid option.

Central banks have been buying an average of 1,000 tonnes of gold per year over the past four years, roughly double the pace of the previous decade. The World Gold Council survey found that 74% of respondents expect the dollar's share of global reserves to fall over the next five years, while 89% expect global central bank gold holdings to rise.

Geopolitical tensions, government debt, and changing global trade relationships are cited as reasons for central banks to diversify their reserve allocations. OMFIF found that 51% of respondents consider geopolitical risk an increasingly important reason for holding gold.