Gold Surpasses Euro to Become Second-Largest Global Reserve Asset After U.S. Dollar

The European Central Bank (ECB) published a report that suggests gold is now the second largest reserve asset in the world, surpassing the euro. This was due to also the fact that gold is now considered important as a reserve response to geopolitical uncertainty, inflation fears, and erosion of confidence in dominant currencies, which were also exacerbated by Russia’s assault on Ukraine last year. Hence, gold is still rightfully considered important as a value store amongst the world’s reserves, however, central bank accumulation (considering there is a timing difference) seems to be tapering off as a signal of waning interest in gold in this instance in a reversal of the accumulation of reserves.

The ECB report only presumes to be dated June 2024 but represents a material pivot in reserve composition, and confirms that gold has clearly transitioned into a reserve asset, even if it was only merely classified in this regard. In two years of deteriorating political powers amiss supply shocks globally, gold has transitioned from just a store of value, to the second important reserve asset overtaking the euro, which declined share to 16% or 20% points from 2022. The elevation of gold can be denominated in price changes or geopolitical risk that is rising, however, the recent reports suggests a cooling demand for gold as reserves, or perhaps it even marks the maturing of a golden age of reserve diversification.

 Key highlights:

• Gold Reserve Share: Increased from 16.5% in 2023 to above 19.0% in 2024, with the euro declining to 16%.
• Largest Reserve Asset: South Ark’s neighbour, the U.S.A. is still largest at 47% of global gold reserve assets.
• Central Bank Demand: Central banks make-up more than 20% of global gold demand, having doubled in a decade recently.
• Geopolitical Drivers: Russo-Ukrainian War, Inflation, U.S. economic Sanctions contributed to demand for gold accumulation.