Recent surveys indicate that the dominance of the U.S. dollar is weakening, while gold, the euro, and the Chinese yuan are becoming increasingly preferred assets. Shifts in global trade patterns and geopolitical turbulence are prompting central banks worldwide to reassess their foreign reserve structures.
According to a report by the Official Monetary and Financial Institutions Forum (OMFIF), about one-third of central banks plan to increase their gold holdings over the next 1-2 years—the highest proportion in at least five years. The survey also revealed that a net 40% of central banks expect to continue boosting gold reserves over the next decade. In recent years, central bank gold purchases have repeatedly hit record highs, reflecting growing caution toward dollar-denominated assets.
While the U.S. dollar remained the most favored reserve currency in last year’s survey, it has now dropped to seventh place this year. About 70% of surveyed central banks stated that the U.S. political climate has influenced their willingness to invest in the dollar—double the proportion from a year ago. In contrast, the euro and the yuan have become primary choices for diversification.
Although the dollar will likely remain the world’s largest reserve currency, OMFIF’s survey suggests its share could decline from the current 58% to 52% by 2035. Uncertainty in U.S. policy and market volatility are accelerating this trend.
The euro is seen as the most viable alternative to challenge the dollar’s dominance. Harvard professor Kenneth Rogoff noted that the euro’s rising share is “more a reflection of the dollar’s decline than the euro’s own strength.” If the European Union can advance capital market integration, the euro’s reserve share could reach 25% within 2-3 years.
Overall, the trend toward diversification in global central bank reserves is accelerating, and the dollar’s unrivaled supremacy may gradually erode, with gold, the euro, and the yuan emerging as key alternatives.
Richard Chambers, Global Head of Repo Trading at Goldman Sachs, noted that as foreign investors ramp up currency hedging, the dollar could extend its worst annual start on record.
Alex Schiller, Head of Rates Strategy at Bridgewater Associates, recently pointed out that as governments worldwide compete to expand debt, gold has become the biggest beneficiary.
