The European Central Bank: Gold Surpasses Euro as the World’s Second-Largest Reserve Asset

The European Central Bank (ECB) has reported that gold has overtaken the euro, securing its position as the second-largest reserve asset among global central banks. The shift is attributed to record-breaking purchases and rising gold prices. In 2024, gold accounted for 20% of global official reserves, surpassing the euro at 16% while remaining behind the U.S. dollar, which holds a 46% share. The ECB emphasized that central banks continue to accumulate gold at an accelerated pace, with over 1,000 tonnes purchased globally for the third consecutive year. This volume represents one-fifth of annual global production and is twice the average purchase volume recorded during the 2010s.

Gold reserves held by central banks are nearing levels last observed during the Bretton Woods system era. Before 1971, international exchange rates were tied to the U.S. dollar, which maintained a fixed gold standard. Recent figures indicate that central banks collectively held 36,000 tonnes of gold in 2024, approaching the 38,000-tonne peak recorded in the mid-1960s. The ECB noted that gold holdings today are nearly equal to those of 1965.

The World Gold Council identified China, India, Turkey, and Poland as key gold purchasers in 2023, a trend accelerated by gold’s 30% price increase last year. By 2024, gold prices had risen another 27%, briefly touching a historic high of $3,500 per ounce. The ECB explained that the combination of substantial acquisitions and increasing market value positioned gold as the second-largest reserve asset globally, behind only the U.S. dollar.

Despite storage costs and zero yield, gold remains a preferred safe-haven asset due to its liquidity, absence of counterparty risk, and immunity to financial sanctions. Concerns about geopolitical instability and U.S. debt levels have prompted central banks to diversify their holdings away from the dollar. The trend toward de-dollarization has gained momentum since the Russia-Ukraine conflict, with Western nations imposing financial restrictions on Russia. In 2022, approximately $280 billion in overseas assets held by the Russian central bank were frozen by Western authorities.
The ECB observed that many central banks regard gold as a safeguard against financial restrictions, including the freezing of assets in international markets.

Historically, gold’s appeal declined when real yields on other assets rose, but this trend has not held since early 2022. Investors now view gold more as a hedge against political risks rather than solely a defense against inflation