Gold has achieved a landmark milestone in global finance, overtaking US Treasuries as the world's largest reserve asset held by central banks. According to the European Central Bank (ECB), gold accounted for nearly 27% of global official reserves by the end of 2025, compared with 22% for US Treasuries, as reported by the Financial Times. This represents a dramatic reversal from just one year earlier when US Treasuries still held the top position. The change has been driven by two key developments: a sharp rally in gold prices and sustained buying by central banks over recent years. As ECB President Christine Lagarde noted in the report, "Geopolitical tensions continue to drive strong central bank demand for gold." The ECB report highlighted that gold's share topped Treasuries and the euro mainly because of "valuation effects," with prices rising by about 60% last year and 30% in 2024, which "mechanically increase the share of gold in total official foreign reserves."
Central banks have resumed their gold accumulation after a brief pause in March, with Poland and China leading the charge. According to the World Gold Council (WGC), central banks turned net buyers of gold in April, purchasing 17 tonnes after being net sellers in March. Poland emerged as the top buyer with 14 tonnes in April, bringing its year-to-date purchases to 45 tonnes, with gold reserves now at 595 tonnes, representing 30% of its total reserves. China accelerated its purchasing pace to a 16-month high of 8 tonnes, extending its current buying streak to 18 consecutive months, with official gold reserves now standing at 2,322 tonnes, or 9% of total reserves. The WGC reports that the Czech Republic made its 38th consecutive monthly purchase of 3 tonnes, maintaining a remarkable streak of consistency with gold reserves at 79 tonnes, or 6% of total reserves. Eastern European and Asian central banks continue to dominate purchases, with both regions averaging 12 tonnes and 11 tonnes per month respectively over the past 36 months, compared to global central banks' average net purchases of 29 tonnes over the same period.
The shift reflects a fundamental change in how central banks approach reserve management and risk diversification. According to the ECB, gold pays no interest and is expensive to store, yet many central banks now treat it as a hedge against geopolitical uncertainty. For decades, US Treasuries were considered the safest reserve asset due to their liquidity, stability, and backing by the US economy. However, countries are increasingly prioritising safety and strategic autonomy over returns, viewing gold as politically neutral because it is not controlled by any government. This move does not signal the dollar's collapse, as the US dollar still dominates global trade and reserves, but it does indicate reduced reliance on one country's financial system. Despite gold's rise, dollar-denominated assets still represented the largest share of global reserves at 42%, though the trend has accelerated after Washington froze Russia's dollar reserves following its 2022 invasion of Ukraine. The ECB report noted that "Survey data suggest that central banks hold gold not only for diversification but also as a hedge against geopolitical risk," with central banks treating gold as a strategic asset rather than purely a financial instrument.
India's central bank has significantly increased its gold holdings as part of this global trend, though recent data shows a pause in active purchases. According to the RBI's FY26 Annual Report, India's gold reserves stood at 880.52 metric tonnes at the end of March 2026, with gold now accounting for 16.7% of the country's total foreign exchange reserves, up sharply from 9.3% in September 2024. However, the World Gold Council reports that India did not feature in the WGC's April report, indicating no further gold buying by the Reserve Bank of India. The RBI has dramatically slowed its purchasing pace, buying just 0.13 tonnes in January and none in February after a four-month hiatus, following aggressive purchases of 72.6 tonnes in 2024 and 4.02 tonnes in 2025. Despite the pause in active buying, gold's share in India's total forex reserves has risen significantly — from 8.3% of net foreign assets in March 2024 to 17.2% by March 2026, driven primarily by revaluation gains from higher gold prices rather than fresh purchases.
The reserve shift carries significant implications for global markets and emerging economies. According to the ECB, if central banks reduce US Treasury purchases over time, borrowing costs for the US government could gradually rise. At the same time, stronger demand for gold can keep prices elevated and increase volatility in commodity markets. For India, the trend has both strategic and economic implications, as higher global demand for gold can strengthen the value of India's reserve assets while potentially pushing domestic gold prices higher and widening the trade deficit due to increased dollar requirements for gold imports. However, a gradual move towards diversified reserve systems could benefit emerging economies like India by reducing vulnerability to sudden dollar shocks. The WGC data shows that global central banks' average net purchases over the past 36 months total 29 tonnes, indicating sustained institutional demand for gold as a strategic asset. However, recent geopolitical developments have created volatility in gold markets, with gold prices declining sharply following the Iran war outbreak, dropping 20% from a recent high of $5,602 to approximately $4,482, though they have recovered somewhat to $4,469 as of the latest data. Despite the recent decline, gold remains 13.5% lower than its pre-war price of $5,174, with year-to-date gains of just 3% since January, significantly lagging the 65% surge seen in 2025.
