Central Banks More Gold Less Dollars

By Rhod Mackenzie

A recent survey of 75 central banks world wide has illustrated a serious reorientation of financial flows, with a shift away from the dollar and towards gold, the euro, and the yuan. Lets recall Russia pioneered this trend over a decade ago after sanctions were introduced against it after the reunification of Crimea  and since then China and other countries have since adopted similar strategies in stockpiling gold.
This show there is growing evidence of the reduction  of the dollar in central bank's reserves. So what are the reasons for the growing dissatisfaction among countries with regard to using the dollar for their reserves?
A survey of 75 central banks conducted between March and May shows how tariffs imposed by US President Donald Trump on Liberation Day on April 2 have affected the financial reserves policy.
The ongoing trade tensions have resulted in market volatility, leading to a decline in the value of the dollar and US Treasuries. This has prompted central banks worldwide, which hold significant dollar reserves, to reevaluate their funding strategies and transition away from the dollar in favour of gold, the euro, and the Chinese yuan, this was  reported by the official Monetary and Financial Institutions Forum (OMFIF).

It is estimated that 40% of central banks are planning to increase their gold reserves over the next decade. The dollar, which was the most popular currency purchase last year, has fallen to seventh place this year, according to OMFIF. Furthermore, 70% of survey respondents indicated that the current political climate in the U.S. is deterring their investment in the dollar, which is more than double the number of respondents who expressed similar concerns a year ago.
Among the currencies that stand to benefit most from the dollar's departure, the euro and yuan are expected to increase their euro holdings over the next 12-24 months, with 16% of central banks surveyed by OMFIF planning to increase their euro reserves over the same period. This will make the euro the most sought-after currency, up from 7% a year ago. The euro is followed by the yuan. However, over the next decade, it is the yuan that will become the currency of choice, with 30% of central banks expecting to increase their holdings of the currency. It is estimated that the yuan's share of global reserves will increase threefold to 6%.
According to the IMF Blog, the US dollar's share of global foreign exchange reserves has decreased by almost 25% over the past 25 years. Back in 1999, the US dollar accounted for more than 70% of global reserves; by 2023, this figure had fallen to 57.3%, representing a historicaly low level.
"In recent years, most banks in developing countries have increased their focus on gold. This year it has overtaken the euro to become the second-largest asset in central bank reserves, accounting for 23% at the end of 2024. Its growth can be attributed to record purchases (more than 1,000 tons annually since 2022) and the almost doubling of its value. The dollar's share continues to decline and has now in 2025 has dropped to 46%," notes Alexander Potavin, an analyst at FG Finam.
Russia has become the main trendsetter of this trend, after the West, led by the US, froze Russian reserves. The process of de-dollarization is being exacerbated by the ongoing trade wars instigated by the US and the persistent growth of the US national debt.
"Russia was the first to begin the process of de-dollarization back in 2014. The yuan was prioritised due to its status as one of the primary trading directions available following the implementation of a record number of sanctions against Russia. However, the yuan is not the only currency used in these transactions; currencies of other friendly countries are also used," says Mikhail Gordienko, professor at the Department of Sustainable Development Finance at the Plekhanov Russian University of Economics.
Between 2018 and 2020, the Central Bank of the Russia made significant changes to the composition of its international reserves, reducing the share of the dollar and increasing the share of gold and yuan. In light of the rising gold prices, this strategy proved to be profitable. The share of gold in the Russian Federation's reserves reached 25%, and in terms of value, it generated a substantial revaluation profit. Consequently, Russia maintained the stability of its reserves even under sanctions pressure," says Vladimir Chernov, analyst at Freedom Finance Global.
Analysts are confident that this trend towards de-dollarization will only gain momentum. "Events that have already led to the demand for gold by the central banks of some African countries for the purpose of restoring their sovereignty. Last year, the Central Bank of China made record purchases, both officially and through third-party market participants. Furthermore, it is estimated that up to a third of the world's central banks are planning to augment their gold holdings. This is indicative of a crisis in global payment systems and the desire of states to play it safe in the event of a breakdown of the current currency system," notes Mikhail Gordienko.
"In my opinion, the primary reasons for this are not only political risks and sanctions, or the precedent of freezing Russian gold and foreign exchange reserves, but also the growing role of Southeast Asia and China in the global economy, the change in currency trade corridors and the growing distrust of the dollar as a neutral reserve asset. Moreover, I believe that this is not a collapse of the dollar, but a slow but systemic shift towards multipolarity," says Chernov.
Meanwhile, the dollar exchange rate experienced a decline in the first half of 2025. In the first quarter, the DXY index (the dollar index against six world currencies) fell by 4.6%, and by an even greater margin in the second quarter, by 5.3%. By the end of June, it had fallen to its lowest levels since spring 2022. "However, there is nothing critical in this weakening of the American currency as yet.
For instance, during his first term, Trump expressed a preference for a lower dollar rate. At the beginning of his second term, we observe a recurrence of the same scenario. Conversely, Democratic presidents typically commence their tenures with a weak dollar, which subsequently appreciates in value," Potavin elucidates. According to his forecast, in the third quarter, the dollar rate is expected to weaken against world currencies by a further 3%.

What further issues are being experienced with the dollar in relation to central banks worldwide?

The primary reason for this is the politicisation of the dollar, the growth of sanctions risks, high volatility, and uncertainty in US economic policy. Since 70% of the central banks surveyed in the OMFIF study noted that the political situation in the US discourages them from investing in the dollar, this is a key factor. The chosen alternatives are determined by the direction of trade flows: in Asia, the yuan is the primary settlement currency, in the West, the euro is favoured for its stability and neutrality, and gold is recognised as a universal asset that operates outside of political influences," says Chernov.

Conversely, gold has demonstrated remarkable growth and set new records. "Gold is not subject to the same sanctions as other currencies, but it is less convenient for physical transactions. This is where the risks lie, so some institutions in the financial market offer various digital assets to eliminate the physical movement of metal and at the same time simplify settlements," notes Mikhail Gordienko.

It is important to note that there are inherent risks involved in replacing the euro and yuan. "Despite the euro's liquid debt market, valued at almost 11 trillion euros, being a significant asset, there is a notable risk of a political and, consequently, financial and economic breakdown of the EU. The risks for the yuan are in the significant control over the currency by Beijing, but the yuan is supported by China's expanding trade relations with the entire world," adds Gordienko.
"Over the next decade, the composition of global reserves will become more balanced. The yuan could triple its share of reserves to 6%, gold will remain a key safe haven, and the dollar's share will continue to decline to around 50%.
This will reduce the reliance of developing countries on US currency risks, strengthen the role of regional currencies and stimulate the development of cross-border settlements in national currencies. I believe that the global financial system is gradually moving away from a unifying dollar currency towards a more diverse and inclusive financial landscape," Chernov says.

"The global monetary system has essentially already reached multipolarity; it only remains to refine and change various payment mechanisms and instruments, which is happening. In this system, gold is a universal, unconditional asset that enables the insurance and preservation of states' financial resources. The euro will continue to be used and in demand within the EU if the EU's current structure is maintained over the coming years. However, there are risks of strengthening centrifugal processes, as evidenced by various protests in Brussels from Western and Eastern countries with the lowest standards of living. The yuan is the primary currency of Southeast Asia and neighbouring countries," concludes Mikhail Gordienko.