Geopolitical tensions have sparked a gold-buying frenzy, with gold surpassing the Euro to become the second largest asset in global central bank reserves.

The record-breaking purchase volume and sharp rise in gold prices have caused gold to surpass the euro, becoming the second largest asset in global central bank reserves. According to the annual assessment of the international status of the euro by the European Central Bank, calculated at market prices, gold now accounts for 20% of global foreign exchange reserves, surpassing the euro's 16%. At the same time, the percentage of the US dollar in global foreign exchange reserves continues to decline, to 46%. Since the end of 2022, the price of gold has doubled, with its remarkable rise partly driven by purchases from central banks around the world. In the past three years, the annual purchase volume of gold by central banks has exceeded 1000 tons, double the average purchasing speed before 2022. Currently, central banks around the world hold gold reserves at levels not seen since the late 1970s. The European Central Bank stated in the evaluation: "Since the outbreak of the Russia-Ukraine conflict in 2022, the demand for gold as a currency reserve has sharply increased and remained high." It is reported that after the outbreak of the Russia-Ukraine conflict, the Group of Seven (G7) froze Russia's foreign exchange reserves within its system, prompting some central banks to reduce their dependence on the Western financial system. In addition, speculation about inflation threats and the possibility of the United States adopting unfavorable policies towards foreign creditors further drove the allocation of gold reserves. There has historically been a negative correlation between gold prices and real yields - as real yields rise, the attractiveness of gold declines because gold itself does not yield interest. However, the European Central Bank pointed out that this relationship was broken in 2022, as central banks around the world continued to purchase gold despite rising global interest rates to hedge against sanctions risks. The evaluation also noted: "Since the fourth quarter of 2021, countries close to China and Russia geopolitically have seen a more significant increase in the percentage of gold in their official foreign exchange reserves."