The reserve "balance" of global central banks is shifting. Research from Deutsche Bank shows that as of October 2025, gold's share in global central bank reserves (foreign exchange + gold) has surged from 24% at the end of June this year to 30%. In stark contrast, the dollar's share has declined from 43% to 40%.

This shift reflects not only strategic adjustments in asset allocation by central banks but also signals a potential turning point in the global monetary system. Deutsche Bank further projects that if gold prices rise to $5,790 per ounce, the reserve shares of gold and the dollar would equalize at 36%, assuming no changes in current holdings.

**Record Gold Demand: Central Banks Purchase 634 Tons This Year** The rise in gold's reserve share is driven by both higher gold prices, which passively boost the value of existing holdings, and active accumulation strategies by central banks.

According to the World Gold Council, global gold demand reached a record 1,313 tons in Q3 2025, marking the highest quarterly figure on record. Investment demand remains robust, with gold ETFs, bars, coins, and central bank purchases all growing at rates above their 10-year averages.

Central bank gold buying stands out, with Q3 purchases hitting 220 tons, up 28% quarter-on-quarter. Cumulative purchases for the first three quarters reached 634 tons, putting full-year purchases on track to exceed 1,000 tons—continuing the strong trend seen from 2022 to 2024.

Emerging markets are leading this gold-buying wave. For instance, Poland’s central bank has purchased 67 tons this year, becoming one of the largest buyers, and plans to raise its gold allocation target from 20% to 30% of total reserves. Turkey’s central bank, meanwhile, has been a net buyer for 26 consecutive months, increasing its gold reserves from 540.19 tons to 634.76 tons as of July 2025.

China’s central bank reported on November 7 that its foreign exchange reserves stood at $3.343 trillion at the end of October, up from $3.339 trillion in September. Gold reserves rose by 30,000 ounces (about 0.93 tons) to 74.09 million ounces (about 2,304.457 tons), marking the 12th consecutive month of increases.

The World Gold Council attributes this trend to geopolitical uncertainty, gold’s lack of credit risk, and its resilience during crises. Central banks increasingly view gold as an essential part of their reserve portfolios, balancing stability, liquidity, and returns while adjusting purchase volumes based on price dynamics.

A survey by the World Gold Council found that 95% of central banks expect to continue buying gold over the next 12 months, with 43% planning to actively increase allocations—indicating a structural shift rather than a cyclical move.

However, strong central bank demand faces challenges. Qu Rui, deputy director of research at Orient Credit Rating, noted that global gold production averages around 3,000 tons annually, while central bank purchases have exceeded 1,000 tons per year over the past three years. "This means central banks are consuming a significant share of annual supply. While higher prices may stimulate mining and recycling, physical gold supply is ultimately limited, posing potential bottlenecks."

**Dollar’s Declining Share: Exchange Rate Volatility and Active Diversification** In contrast to gold’s rally, the dollar’s reserve share continues to shrink.

Deutsche Bank reported that the dollar’s share in global reserves (foreign exchange + gold) fell from 43% to 40% between late June and mid-October. IMF data shows the dollar’s share in global foreign exchange reserves dropped to 56.32% at the end of Q2 2025, down 1.47 percentage points from Q1—the lowest level in three decades.

Zhao Qingming, vice president of the Foreign Exchange Information Research Institute, explained that exchange rate fluctuations are a key technical factor. The IMF also noted that excluding currency effects, the dollar’s share remained stable in Q2. The dollar depreciated 7.9% against the euro in Q2 and 10.6% in the first half of 2025—its steepest decline since 1973—weighing on the valuation of dollar-denominated reserves.

Meanwhile, U.S. Treasury data shows that official foreign investors (excluding international organizations) net purchased just $51 billion in U.S. securities (Treasuries, agency bonds, corporate debt, and equities) in Q2 2025, down 94.4% quarter-on-quarter and 72.2% below the average from Q2 2023 to Q1 2025.

China, the largest emerging market, has been adjusting its dollar holdings. In July 2025, it reduced its U.S. Treasury holdings by $25.7 billion, bringing its total to $730.7 billion—marking its fourth reduction this year.

Qu Rui views the dollar’s decline as the start of "normal diversification" but also an early sign of a "slow erosion." He emphasized, however, that the dollar will remain the dominant reserve currency for the foreseeable future due to its entrenched network effects and role in trade, debt issuance, and exchange rate benchmarks.

Yet challenges loom. Analysts note that while the dollar’s dominance is unlikely to be overturned soon, structural issues like soaring U.S. debt and fiscal deficits are undermining its credibility, accelerating the push for reserve diversification—with gold being a key beneficiary.

**Can Gold Hit $5,790? Implications of Reserve Parity** Deutsche Bank’s projection of gold reaching $5,790 per ounce—where its reserve share would match the dollar’s—has drawn attention.

Qu Rui argued that achieving this would be more than symbolic: "It would be concrete evidence of the dollar’s waning dominance and the dawn of a diversified reserve era centered on gold and non-dollar assets."

This shift would have dual effects. Analysts say gold’s rise would break the dollar’s post-Bretton Woods monopoly, solidifying a multipolar reserve system. Additionally, as gold’s valuation grows relative to global reserves and GDP, its role in international payments, clearing, and cross-border financing could expand—potentially reshaping the monetary and payments landscape.

However, climbing from around $4,000 to $5,790—a 45% increase—is no small feat. Qu Rui suggested this could take 5–8 years or longer, contingent on factors like accelerated de-dollarization, geopolitical risks, or surging industrial demand for gold.

Others are skeptical. Zhao Qingming cautioned that Deutsche Bank’s scenario is theoretical, with real-world outcomes dependent on multiple variables. Analysts also warn that a Fed rate hike cycle, improved dollar credibility, or a risk-on market environment could derail gold’s ascent.