Gold's Rise as Reserve Asset Tainted by Private Demand, Says Fed Researcher

According to Colin Weiss, Principal Economist for Global Financial Flows at the Federal Reserve, gold's rise in value as a reserve asset is largely driven by private demand rather than central bank purchases. In his research note, Weiss argues that comparing world gold reserves and foreign official holdings of U.S. Treasury securities is misleading because it doesn't account for the valuation effects caused by private sector demand.

Weiss notes that while central banks have been accumulating gold in recent years, most of these reserves are legacy holdings from the Bretton Woods era, accumulated before 1971. This means that even though world gold reserves surpassed foreign official holdings of U.S. Treasury securities in 2025, it's not necessarily a sign that central banks prefer gold over Treasuries as a reserve asset.

When excluding the United States' massive gold reserves from calculations, world gold reserves were actually lower than the headline number throughout much of 2025. By June 2026, foreign official holdings of Treasuries again surpassed world gold reserves excluding the U.S., despite further increases in gold reserves as measured in fine troy ounces.

Weiss suggests that comparing foreign official holdings of treasuries to gold reserves understates the importance of Treasury securities in these reserves due to valuation effects driven by private sector demand and massive legacy gold holdings. Despite this, official sector investors have been accumulating gold on net since 2008, and the pace of this accumulation likely increased significantly beginning in 2022.