Central Banks Flee Dollars for Gold as Reserve Managers Plan Record Allocations

Central banks around the world are rethinking their reserve management strategies, opting to reduce their exposure to US dollars and instead invest in gold. According to a recent survey by OMFIF, more central bank reserve managers plan to cut their dollar holdings than increase them for the first time ever.

The decision is a result of the US government's actions during the 2022 invasion of Ukraine, when it froze roughly $300 billion of Russia's reserves held outside of Russia. This event taught reserve managers that they are not immune to US government control and can have their assets frozen at any moment.

In response, central banks started looking for alternative safe-haven assets that the US government cannot confiscate. Gold has emerged as a top choice, with central banks buying gold over the past few years. In fact, between 2022 and 2025, they purchased around $200-300 billion worth of gold, accounting for about 2% of their reserves.

As a result, gold prices more than doubled from approximately $1,600 to over $4,000 during this period. However, the recent spike in gold prices to $5,600 was largely driven by hedge funds and retail investors, not central banks.

The OMFIF survey found that reserve managers expect to move at least 7% of their reserves out of dollars over the next decade, with most likely going into gold. Given that a 2% allocation to gold caused prices to more than double between 2022 and 2026, it's clear that central banks plan to continue investing in gold for years to come.

Moreover, even at record prices, many reserve managers still plan to buy gold over the next two years. Their long-term strategy is focused on protecting their national savings by acquiring assets that are less susceptible to US government confiscation.