Gold surpasses euro in international reserves

(MENAFN)
Gold has overtaken the euro to become the world’s second-largest reserve asset by market value, according to the European Central Bank (ECB). The change reflects record buying by central banks and growing geopolitical tensions.

In 2024, central banks added more than 1,000 tonnes of gold to their holdings — nearly double the average annual amount over the past 10 years —bringing total official holdings close to 36,000 tonnes. This figure is approaching the all-time peak last seen during the Bretton Woods era in 1965.

The combination of large purchases and surging prices made gold the second-largest reserve asset by market value in 2024, after the US dollar. At the end of the year, gold made up 20% of total official reserves, overtaking the euro, which stood at 16%. Gold prices rose nearly 30% in 2024, exceeding $3,500 per ounce and boosting its appeal in reserve portfolios.

The ECB explained that two-thirds of central banks view gold as a diversification tool, while 40% use it to hedge against geopolitical risks. The greatest buyers were predominantly emerging markets, particularly those less aligned with the West.

Meanwhile, the euro’s share of total reserves remained broadly stable at 20% when measured at constant exchange rates, although its market value fell below gold. The ECB described the euro’s role as “stable overall.”

Some countries are now exploring alternatives to traditional payments, influenced by geopolitical factors such as the conflict in Ukraine, US-China tensions, upheaval in the Middle East, and a growing BRICS movement to move away from Western financial systems.

Additionally, the rise of cryptocurrencies and stablecoins backed by US Treasuries underscores the growing competition to traditional currencies. The US dollar’s share in official reserves dipped slightly to 57.8% in 2024.

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