Gold overtakes Treasuries in 27% of central bank reserves in 2025

Central banks now hold more gold than U.S. Treasuries for the first time in three decades, marking a structural shift in how the world stores its reserves.

Global central banks pushed gold past U.S. Treasuries as a reserve asset for the first time since 1996, allocating 27% of holdings to bullion versus 22% in government bonds, according to a European Central Bank report released this week.

"It is not coincidental that Poland, which shares a border with Russia and attaches high value to its membership in NATO, has been one of the largest gold buyers," said Barry Eichengreen, economics professor at the University of California, Berkeley.

Poland purchased about 100 metric tons of gold in 2025, joining Kazakhstan, Brazil, China and Turkey among the leading buyers. Since Russia's invasion of Ukraine in 2022, China has accumulated 350 tons, Poland 320 tons, Turkey 220 tons and India 130 tons, the ECB said. The shift accelerated after the U.S. and allies froze Russian foreign exchange assets in 2022, a move that signaled dollar-denominated holdings could be weaponized.

The rebalancing carries implications for U.S. borrowing costs and the dollar's reserve status. Dollar-denominated assets still represent the largest share of global reserves at 42%, but the trend line is moving against Treasuries. If central banks continue diversifying at the current pace, the U.S. may face higher funding costs on its nearly $36 trillion in public debt, with the budget deficit running at almost 6% of gross domestic product.

The ECB data show that gold's share rose seven percentage points from 20% in 2024, while Treasuries fell three points from 25%. Part of the shift reflects the metal's price surge — gold gained about 60% last year after a 30% rally in 2024 — but central banks also bought 850 tons in 2025, extending a buying spree that began in 2022.

The last time the world saw a comparable rebalancing was in the late 1960s and early 1970s, when foreign governments grew uncomfortable holding dollars as Washington ran expansive fiscal policies tied to the Vietnam War and domestic spending. That era culminated in President Richard Nixon's August 1971 decision to end the dollar's convertibility into gold at $35 an ounce, a rupture that reshaped the global monetary order.

Geopolitics, Not Just Portfolio Theory

The current shift is driven less by yield considerations and more by geopolitical strategy. The ECB survey found that 70% of central banks identified geopolitics as the most significant risk they face this year. The U.S. budget deficit, tariff policies and strains within the NATO alliance have all contributed to a reassessment of dollar assets.

"Since the Cold War, the U.S. had provided a nuclear umbrella to other nations, which reciprocated by holding a disproportionate share of their reserves in dollars and Treasury securities," Eichengreen said. That implicit bargain now appears less certain.

The biggest single buyer of gold in 2025 was not a central bank at all. Tether, the stablecoin issuer, purchased more than 100 tons, pointing to cryptocurrency as another potential alternative to dollars for international transactions.

What the Numbers Don't Show

The headline figures overstate the scale of deliberate diversification. If the 2025 reserve calculations are adjusted using 2023 gold prices, gold's share falls to 16%, the ECB noted. The increase from 20% to 27% largely reflects the metal's price appreciation rather than active buying. Still, the direction is clear: central banks are reducing their dependence on dollar assets at the margin, and that process has no near-term catalyst to reverse.

Foreign investors continue buying U.S. equities at record levels — holdings reached $19.86 trillion as of June 2025, Treasury data show. But reserve allocation and investment behavior are not the same thing. Central banks prioritize safety and liquidity over returns, and gold offers something Treasuries cannot: political neutrality.

For investors, the message is that the dollar's dominance is no longer judged only by liquidity and yield. It is judged by trust. And trust, once repriced, is rarely restored quickly.

This article is for informational purposes only and does not constitute investment advice.