Central Banks Pivot to Gold as US Dollar Dominance Wanes

The World Gold Council reported in its 2026 Central Bank Gold Reserves Survey that central banks are aggressively increasing gold holdings to hedge against economic uncertainty and geopolitical instability. Approximately 89% of 76 polled central banks expect global gold reserves to rise over the next year, with a record 45% planning to increase their own institutional holdings. This shift is driven by gold's role as an inflation hedge and portfolio diversifier, especially following conflicts in the Middle East and the Iran war in early 2026.

Gold has displaced US Treasuries as the world's leading reserve asset, accounting for 27% of global reserves by the end of 2025. Central banks have averaged 1,000 tonnes of gold purchases annually over the last four years, double the previous decade's average. Consequently, 74% of respondents predict the US dollar's share of global reserves will decline over the next five years.

Institutional storage patterns are also evolving. While the Bank of England remains the most preferred vaulting location for 57% of respondents, its share has dropped from 64%. There is a growing trend toward domestic storage and diversification of vault locations to ensure asset accessibility, a move accelerated by the freezing of Russian foreign assets. Notable activity includes the Reserve Bank of India, which expanded its reserves to 880.52 tonnes in FY26 and repatriated over 100 tonnes of gold.