In recent observations of the gold market, a notable trend has emerged: the share of the US dollar in central bank reserves is declining, while gold is being increasingly reallocated by nations worldwide.

According to the latest statistics, gold holdings by central banks have exceeded their US Treasury holdings for the first time since 1996. This suggests that dollar-denominated assets may no longer be the stable choice for central banks.

From a price perspective, a similar shift is evident. Despite short-term volatility, gold prices have risen significantly this year—from ¥614 per gram to over ¥900, marking a nearly 50% increase. Over the past decade, gold prices have surged by approximately 300%.

Why is gold regaining favor among central banks at this moment? And why is gold often intrinsically linked to the dollar in discussions?

**Rising Central Bank Demand for Gold** The sharp rise in gold prices this year stems from multiple factors, including heightened geopolitical risks, increased safe-haven demand, and speculation around the Federal Reserve’s rate cuts. Beyond these short-term fluctuations, however, lies a structural shift in gold demand.

Gold supply typically remains stable, so price movements are largely driven by central bank reserve adjustments. A significant turning point came in late 2022, when global geopolitical risk indices hit a 20-year high. The US escalated financial sanctions, targeting a record number of countries and firms since 1990.

In response, central banks began aggressively increasing gold purchases. In Q4 2022 alone, global central banks bought 417 tons of gold—the highest since 2011. This trend has persisted, driving gold prices to historic highs. A World Gold Council survey found that 95% of central banks expect further increases in global gold reserves over the next year, the highest level in six years.

Qu Rui of Oriental Credit Rating’s research team explains that the shift reflects a breakdown in the consensus on the safety of dollar reserves. The 2022 Ukraine crisis and subsequent US-led sanctions demonstrated how dollar reserves could be weaponized, eroding trust in their security. Gold, as a non-sovereign asset with no counterparty risk, has become the logical alternative.

Over-reliance on dollar reserves can constrain a nation’s economic policy autonomy. Thus, even at higher costs, diversifying reserves with gold is now a priority—fueling its price surge.

**Emerging Economies Lead Gold Purchases** The gold rally isn’t solely about hedging currency risks. Emerging economies have become the primary drivers of gold demand since the 2008 financial crisis.

Yang Zirong of the Chinese Academy of Social Sciences notes that reserve asset choices reflect geopolitical logic. The Atlantic Council observes that nations politically distant from the US show stronger gold-buying tendencies. Countries at odds with the US, wary of dollar-dominated systems, increasingly view gold as a safer store of value amid rising geopolitical risks.

By Q2 2025, global central banks’ gold reserves surpassed their US Treasury holdings for the first time, signaling gold’s ascent as the preferred safe-haven asset. This shift not only mitigates financial risks but also enhances nations’ influence in the global financial system.

More crucially, gold accumulation represents a strategic move toward greater political autonomy. As countries reduce dollar reserves in favor of gold and alternative currencies, they reclaim economic sovereignty.

**Dollar Enters a Trust Adjustment Phase** Gold has outperformed major assets this year, even surpassing US equities—a rare occurrence.

The dollar’s waning appeal has redirected safe-haven flows to gold. This realignment accelerated in February when US tariff policies spooked markets, and America’s soaring debt levels further undermined confidence. Ray Dalio of Bridgewater Associates warns that the US is nearing the end of its long-term debt cycle, with debt growth outpacing economic output and inflation eroding dollar value.

Ultimately, the shift from dollars to gold reflects a broader recalibration of trust. Where the dollar once reigned as the ultimate safe haven, gold now embodies renewed confidence.

While gold prices may fluctuate, the underlying trend is clear: as US-driven uncertainties persist, nations will continue adjusting reserve allocations for security and growth. The dollar-centric global monetary system is entering a transitional phase, and until a new dominant currency emerges, gold will likely remain central to reserve strategies.