"De-dollarization" accelerates! The number of central banks planning to increase gold holdings hits a historical record

The central bank's gold accumulation craze has reached a historical peak. 43% of central banks plan to increase their gold holdings in the next 12 months, while the proportion of dollar reserves is quietly sliding towards a 15-year low of 46%.

The latest data from a joint survey by the World Gold Council (WGC) and YouGov shows that among 72 surveyed central banks, 43% explicitly stated that they expect their gold reserves to increase in the next 12 months, a significant jump from last year's 29%, marking a historical high in the eight years of this survey.

More notably, no central bank expects to reduce its gold holdings. From a longer-term perspective, 76% of central banks anticipate that the proportion of their gold holdings in reserves will rise in the next five years, up from last year's 69%. In stark contrast, nearly three-quarters of respondents expect central bank dollar-denominated reserves to decline within five years, higher than last year's 62%.

"Western countries have stopped selling gold, and emerging market countries are starting to buy it; they are catching up and building more gold reserves," said Shaokai Fan, Global Head of Central Bank Business at WGC. "Some of the changes in these numbers are quite significant."

The "Gold Substitute" Logic Driven by Geopolitical Crises

Since the outbreak of the Russia-Ukraine conflict in February 2022, gold prices have surged by 95%, reaching a historical high of $3,500.05 per ounce in April this year. More critically, the precedent of frozen Russian foreign exchange reserves has made central banks acutely aware of the unique value of gold as a reserve asset.

According to the WGC survey, a record 95% of respondents believe that central bank gold reserves will increase in the next 12 months, up from 81% last year. The survey also shows that the Bank of England remains the most popular storage location for central bank gold reserves.

More than half of the central banks from emerging economies indicated that the lack of political risk associated with gold is a relevant factor in their decision to hold gold, while 78% emphasized the zero default risk characteristic of gold.

Data shows that central banks have purchased over 1,000 tons of gold annually in the past three years, doubling the average annual level of 400-500 tons in the previous decade. According to consulting firm Metals Focus, this purchasing pace is expected to continue this year.

The WGC survey pointed out that the performance of gold during crises, the need for portfolio diversification, and its inflation-hedging function constitute the three core driving forces for central banks to increase their gold holdings. As of the time of writing, spot gold rose 0.05% to $3,386.

Structural Challenges to Dollar Hegemony

Deeper changes are quietly occurring in the structure of international reserves. Gold surpassed the euro at the end of last year to become the second-largest asset in global central bank reserves. Meanwhile, the proportion of dollar assets, primarily U.S. Treasury bonds, in global reserves continues to decline to 46%, maintaining a long-term downward trend. **

Factors driving the accelerated decline of the dollar's reserve share include the massive fiscal deficit in the United States, confiscation risks, and concerns that foreign creditors may face unfair treatment. All these factors provide structural benefits for gold.

Although the trend of change is clear, Fan emphasizes that this is not a "mad rush for the exit." "Central banks are examining the dollar and U.S. Treasury market with more caution than ever," he stated:

"But I don't think this is some kind of crazy abandonment of the dollar."

The current trend of change indicates that a more diversified international reserve system is forming, and gold's position within it will become increasingly important.

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