Dollar Loses Luster as Geopolitics Sends Investors to Gold

The US dollar is facing increased pressure due to geopolitical risks, causing some investors to seek safe-haven assets like gold. According to the European Central Bank's report on the international role of the euro, the gold share in global official reserves rose to 27% at the end of 2025, surpassing central banks' holdings of US Treasuries. This increase reflects both the rise in gold prices and a deliberate shift by central banks towards accumulating gold.

Despite record valuations, official purchases of gold remained high in 2025, building on a broader trend observed by researchers Arslanalp et al. in their 2023 study. The ECB report highlights that geopolitical risks are driving this move away from US dollars and into gold.

The dollar's decline is also being fueled by escalating Middle East hostilities, which have driven up the price of gold. However, the rally faced headwinds from anticipation of Federal Reserve monetary tightening.