Central banks worldwide are planning to reduce their US dollar holdings for the first time over the next decade, marking a historic shift in global reserve management strategies. According to the latest Global Public Investor 2026 survey and the Official Monetary and Financial Institutions Forum (OMFIF), more central banks intend to decrease their dollar allocations than increase them over the next 10 years, representing the first time the annual survey has found such a trend. This represents a fundamental change from previous years, with the findings gathered from 90 central banks, sovereign wealth funds and public pension funds managing a combined $10 trillion in assets. The shift comes amid growing concerns over policy rate volatility, geopolitical risk and energy security, as respondents increasingly cite these factors as reasons to diversify their portfolios. As reported by Business Standard, the findings align with the global debate about the U.S. dollar's role as the primary reserve currency that has been stoked by U.S. policy uncertainty and heightened geopolitical risks. While the US dollar continues to dominate international reserves and has gained around 3% this year, supported by higher US interest rates and safe-haven flows during geopolitical tensions, nearly 79% of central banks and 60% of public investment funds surveyed believe the global monetary system is steadily transitioning toward a multipolar reserve currency framework. The London-based thinktank OMFIF, which set up in 2010, found that the old assumption that public investors can wait for the environment to normalise looks increasingly unrealistic.
Central banks worldwide are significantly increasing their gold holdings as geopolitical tensions reshape reserve management strategies. According to the latest Global Public Investor 2026 survey, a net 30% of central banks plan to increase their gold allocations over the next one to two years, while 82% now hold physical gold, up from 71% last year. The motivation behind these purchases is becoming increasingly strategic rather than purely financial, with protection against geopolitical risk cited by 51% of respondents, up 11% from 2024. Gold has emerged as one of the strongest beneficiaries of changing reserve strategies, with the precious metal moving to the center of reserve management policies as a hedge against geopolitical risk and concerns about the international monetary system. Gold prices have repeatedly touched record highs in recent months as investors sought protection against inflation, geopolitical tensions and financial market uncertainty. Despite current price weakness, 61% of central banks expect gold prices to trade between $5,000 and $6,000 per ounce by June 2027, though 28% of respondents said current gold prices are already high enough to discourage additional purchases. As reported by OMFIF, gold has moved from being a defensive hedge to becoming a core strategic reserve asset amid persistent geopolitical uncertainty and elevated market volatility. Recent data from the World Gold Council shows Uzbekistan added 24 tonnes of gold between January and April 2026, bringing its total reserves to 414 tonnes, with gold now accounting for approximately 88% of the country's international reserves. This places Uzbekistan behind only Poland in net gold purchases during the period, demonstrating the global trend of central banks increasing precious metal holdings.
Central banks are gradually expanding holdings across a wider range of currencies while maintaining plans to increase euro and China's renminbi holdings. The survey revealed 29% of respondents plan to increase euro holdings in the long term, up from 22% last year, while the euro and China's renminbi emerged as preferred alternatives to the dollar. However, currencies outside the traditional major reserve group are attracting greater attention, with respondents reporting increasing allocations to the Norwegian krone and the New Zealand dollar. Interest has risen significantly in the Norwegian krone, New Zealand dollar and British pound, alongside continued plans to raise allocations to the euro and China's renminbi. Interest in the British pound also continued to grow, though the survey noted that neither currency fully addresses reserve managers' requirements. Almost all respondents viewed the Chinese yuan as an effective tool for portfolio diversification, even as structural limitations continue to constrain both the euro and renminbi from becoming dominant alternatives to the dollar. The survey emphasized that neither the euro nor the renminbi fully solves reserve managers' problem, with the former lacking a single, deep safe asset market, while the latter remains constrained by market structure and geopolitical concerns. As reported by Business Standard, while respondents maintained their intention to increase holdings of the euro and the Chinese renminbi, they said structural challenges had reduced the appeal of both currencies.
The survey found a rapid acceleration in artificial intelligence adoption across public financial institutions, with more than two-thirds of central banks planning to expand AI use in the near future. However, only 9% of central banks said existing AI integration met their needs, indicating significant room for improvement. Most institutions currently use AI for data analysis, forecasting and back-office operations, though adoption varies significantly between developed and emerging economies. Nearly 89% of central banks in advanced economies are already using AI, compared with 44% in emerging markets. The report also highlighted that nearly 60% of public funds plan to increase allocations to infrastructure and real estate over the next two years, with infrastructure and real estate emerging as the preferred asset classes among public funds. Meanwhile, 38% of public funds plan to increase investment in emerging economies, up sharply from 27% in the previous year's survey. As reported by OMFIF, policymakers increasingly view market volatility as a permanent feature rather than a temporary disruption, encouraging investment in technologies that improve decision-making and operational efficiency. However, integration also raises new questions about governance, model risk and cyber resilience.
The survey revealed a notable shift in investment preferences among sovereign investors, with around 38% of public funds intending to increase allocations to emerging markets, up sharply from 27% a year earlier. By comparison, interest in raising exposure to developed economies has fallen to 25%, down from 47% last year. Despite the broader diversification trend, the United States and China remain the world's most attractive investment destinations, largely because of their leadership in the rapidly expanding artificial intelligence sector. The report suggests that while the US dollar is unlikely to lose its reserve currency dominance anytime soon, central banks are increasingly preparing for a world in which reserve portfolios become more diversified, technology-driven and less dependent on a single global currency. This shift reflects the growing recognition that capital preservation remains the leading investment objective, while sovereign risk repricing is viewed as the biggest threat to global financial stability over the same period. Recent developments show Turkey emerged as the world's largest seller during the period, reducing its gold holdings by nearly 80 tonnes, with the majority of sales occurring in March to manage domestic financial conditions. Meanwhile, Russia also reduced its holdings, selling around 6 tonnes in April and approximately 22 tonnes since the beginning of the year.
