Gold Surpasses Euro To Become Second-Largest Reserve Asset, Still Far Behind Dollar, ECB Says

The euro has lost its position as the second-largest reserve asset globally, with gold taking its place, the European Central Bank (ECB) stated in its 2025 annual review.

The top European financial institution took notice of a surge in central bank purchases and record-breaking prices of the yellow metal. At 20% of reserves, gold is slowly closing the gap on the U.S. dollar, which leads at 46%.

"Adjusted for inflation, real gold prices in 2024 surpassed their previous peak seen during the 1979 oil crisis. Meanwhile, gold reserves held by central banks stand at levels close to those last seen in the Bretton Woods era (36,000 tons), although they now account for a far smaller share of total gold supply," the ECB said in the review.

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The bank has stated the persistent rally into 2025, which has (for now) topped at $3,500 per ounce, driven by a mix of investor interest and persistent official sector demand.

The geopolitical shock of Russia's invasion of Ukraine in 2022 triggered a reassessment of reserve strategies among central banks. Concerns over sanctions and the weaponization of reserve currencies drove a shift toward gold, which has long been viewed as a neutral store of value.

This trend was notable among countries geopolitically aligned with or near China and Russia, many of which began increasing their gold holdings in late 2021.

In response, gold demand from the official sector surged to historic highs. Central banks added over 1,000 tons of gold in each of the past three years—more than double the pace seen during the 2010s.

In 2024 alone, official sector purchases represented over 20% of global gold demand, effectively doubling the average share of 10% in the previous decade.

According to recent data from the World Gold Council, Türkiye, India, China, and Poland were the largest gold buyers, collectively adding over 600 tons since the end of 2021. Interestingly, while India recently became the fourth-largest global economy, Poland is its European counterpart and the only regional outperformer in 2024, ING research showed.

Boosted gold reserves could help these economies to safeguard against de-dollarization, and hedge against inflation and political instability.

Despite gold's impressive climb, its dominance is still constrained by supply limitations and competition from other reserve assets. Notably, the global gold supply is expected to grow by just 1% in 2025, while the U.S. dollar money supply (M2) has grown by 4.44% in the last 12 months.

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