Gold overtakes US Treasurys as a top reserve asset in a historic shift away from the dollar

Gold has overtaken United States Treasurys to become a larger share of global central bank reserves than American government bonds, according to a European Central Bank report published this week, marking a historic shift in the architecture of the international monetary system. Bullion rose to 27 percent of global official reserves at the end of 2025, up from 20 percent a year earlier, while US Treasurys fell to 22 percent from 25 percent and euro-denominated reserves held steady at 15 percent. Although dollar-denominated assets overall remain the largest reserve category at 42 percent, gold has now surpassed both Treasurys and the euro to become the second-largest single reserve asset, a position it last held over American government bonds in 1996. The shift, driven by years of aggressive central bank buying and a rally that nearly doubled prices over two years, reflects deepening efforts to diversify away from the dollar amid geopolitical tension and sanctions risk. With gold trading near a record around 4,500 dollars an ounce, the report formalizes a trend that has been reshaping reserve portfolios since Western nations froze Russia’s dollar holdings in 2022.

What did the ECB report reveal about gold overtaking US Treasurys in reserves?

The headline finding is a milestone in reserve composition. The European Central Bank reported that gold’s share of total official foreign reserves climbed to 27 percent by the end of 2025, overtaking the 22 percent held in US Treasurys and the 15 percent in euro-denominated assets. The dollar in aggregate remains the dominant reserve currency at 42 percent, but as a single asset class, gold has moved into second place.

The scale of accumulation is striking. Central banks collectively hold more than 36,000 metric tons of gold, approaching levels last seen during the Bretton Woods era when major currencies were tied to the dollar and the dollar was convertible into gold. The value of gold held by central banks has approached 4 trillion dollars, exceeding their roughly 3.9 trillion dollars of US Treasury holdings.

The shift is both a price effect and a buying effect. The European Central Bank attributed the change mainly to gold’s sharp price appreciation in 2024 and 2025, which mechanically raised its share of reserves, combined with sustained net purchases by central banks. The report, authored as part of the bank’s annual review of the international role of the euro, framed the development as a structural reassessment of reserve exposure rather than a temporary fluctuation.

Why are central banks shifting reserves from US Treasurys into gold?

The core motivation is diversification away from counterparty risk. Gold is an asset with no issuer, no counterparty, and no dependence on any political authority, qualities that make it attractive to reserve managers seeking insurance against the risk that holdings denominated in another country’s currency could be frozen or devalued. As a highly liquid, apolitical store of value, it fills a role that government bonds cannot.

Hedging against geopolitical risk has become the dominant theme. European Central Bank President Christine Lagarde noted in the report that geopolitical tensions continue to drive strong central bank demand for gold, and survey data has repeatedly shown that a majority of central banks increasing reserves cite geopolitical risk as a primary factor. In an era of conflict and unpredictable trade and sanctions policy, gold offers protection that dollar assets do not.

The trend also reflects a search for assets outside the dollar system. Reserve managers have grown increasingly focused on holdings that sit beyond the reach of any single government’s financial infrastructure, and gold is the purest such asset. This is not a wholesale abandonment of the dollar, which remains dominant, but a deliberate rebalancing that reduces concentration in any one sovereign’s liabilities.

How has the sanctions and geopolitical backdrop accelerated de-dollarization?

The pivotal catalyst was the freezing of Russian reserves. The acceleration in gold buying gathered pace after Washington and its allies froze Russia’s dollar-denominated reserves following the 2022 invasion of Ukraine, an action that demonstrated to every central bank that dollar holdings could be immobilized for political reasons. That precedent reshaped how reserve managers think about safety.

Subsequent conflicts have reinforced the logic. The report noted that geopolitical events through 2025 and early 2026 sustained demand for gold as a hedge, and the broader environment of great-power rivalry and unpredictable policy has kept reserve diversification near the top of central bankers’ agendas. Gold’s appeal rises precisely when confidence in the neutrality of the financial system falls.

The trend illustrates a gradual, not abrupt, de-dollarization. The dollar remains the world’s dominant reserve currency at 42 percent of holdings, and no rival is positioned to displace it. What is happening instead is a slow rebalancing at the margin, with countries trimming dollar exposure and adding gold to insulate themselves from sanctions and geopolitical shocks, a process that compounds over time rather than reversing the dollar’s role overnight.

Which countries are driving the central bank gold-buying surge?

The buying has been led by a familiar set of nations. The European Central Bank highlighted sustained purchases by China, Poland, Turkey, and India, with China particularly prominent as both the world’s top producer and consumer of gold, having added to its reserves for many consecutive months. These countries share an interest in reducing reliance on the dollar.

The pace has moderated but remains historically high. Central bank gold purchases eased to around 850 tonnes in 2025 after three straight years of net buying above 1,000 tonnes annually, a slowdown that reflects high prices rather than waning appetite. Demand for bars and coins surged in the first quarter of 2026, led by a 67 percent jump in China to its strongest quarter on record, even as jewellery demand fell on high prices.

Two unusual buyers stand out in the data. The report identified the stablecoin issuer Tether as the single largest gold buyer in 2025, acquiring more than 100 tonnes, a remarkable case of a private digital-asset company outbuying sovereign central banks. Conversely, Turkey sold or loaned roughly 130 tonnes early in 2026 to defend its currency after the United States and Israel struck Iran, one of the largest reserve drawdowns in recent years and a reminder that gold also serves as a crisis buffer.

What does a near-record gold price and the reserve shift mean for markets?

The price backdrop underpins the entire trend. Gold trades near a record around 4,500 dollars an ounce after nearly doubling over two years, and that appreciation has both reflected and reinforced central bank demand. Rising prices increase gold’s share of reserves automatically, while strong official buying provides a durable source of demand that supports prices.

The shift validates the structural bull case for gold. Persistent central bank accumulation creates a price-insensitive buyer that absorbs supply regardless of short-term moves, which historically dampens drawdowns and supports a higher long-term price floor. For gold miners and gold-linked investment vehicles, sustained official demand is a powerful tailwind that distinguishes this cycle from purely speculative rallies.

The implications extend to the Treasury market. If central banks continue to favor gold over US government bonds at the margin, it gradually reduces a source of demand for Treasurys, a dynamic worth watching given the scale of United States borrowing. The effect is incremental rather than dramatic, but a structural rebalancing of official portfolios away from Treasurys is a meaningful long-term consideration for bond yields and the cost of government financing.

What does the trend signal for the dollar’s reserve dominance and investors?

The dollar’s dominance is intact but eroding at the edges. With dollar-denominated assets still representing 42 percent of global reserves, the United States retains the privileges that come with issuing the world’s primary reserve currency, including lower borrowing costs and global demand for its debt. No alternative currency is close to challenging that role.

The direction of travel, however, is clear. The combination of sanctions risk, geopolitical fragmentation, and a search for neutral assets has set central banks on a path of gradual diversification, and gold is the principal beneficiary because no fiat alternative offers the same independence from political control. This points toward a more multipolar reserve system evolving slowly over years.

For investors, the report reframes gold from a speculative trade into a structural reserve asset. None of this is investment advice, but the trend suggests central bank demand will remain a persistent feature of the gold market, supporting the metal through cycles in a way that was not true in past decades. The historic crossing of gold above US Treasurys in official reserves is less a single event than a marker of a slow, durable shift in how the world’s monetary authorities think about safety, neutrality, and the limits of the dollar system.

Key takeaways on what the reserve shift means for gold, the dollar and markets

• Gold rose to 27 percent of global central bank reserves at the end of 2025, overtaking US Treasurys at 22 percent and the euro at 15 percent, according to the ECB.
• Dollar-denominated assets overall remain the largest reserve category at 42 percent, so the dollar’s dominance is intact but eroding at the margin.
• Central banks now hold more than 36,000 tonnes of gold, near Bretton Woods-era levels, worth close to 4 trillion dollars.
• The shift reflects both gold’s sharp price rally, which nearly doubled prices over two years, and sustained central bank buying.
• The freezing of Russia’s reserves in 2022 accelerated diversification by showing that dollar holdings can be immobilized for political reasons.
• China, Poland, Turkey, and India have led the buying, with China posting its strongest quarter on record for bars and coins in early 2026.
• Stablecoin issuer Tether was the single largest gold buyer in 2025 at more than 100 tonnes, outbuying sovereign central banks.
• Turkey sold roughly 130 tonnes in early 2026 to defend its currency after the strikes on Iran, showing gold’s role as a crisis buffer.
• Persistent central bank demand provides a structural, price-insensitive support for gold that distinguishes this cycle from speculative rallies.
• A gradual rebalancing away from US Treasurys is a long-term consideration for bond yields and the cost of US government financing.