📰 Newsletter: “Gold Overtakes Euro as Global Reserve Asset, ECB Says”

Summary

The European Central Bank (ECB) has revealed that gold has surpassed the euro to become the world’s second-largest official reserve asset—behind only the U.S. dollar. As of 2024, global central bank holdings of gold hit 20% of total reserves, compared to the euro’s 16%, following record-breaking purchases in both volume and value.

🔍 Key Developments

1. Gold on a Historic Run

Central banks worldwide acquired more than 1,000 tonnes of gold for the third straight year in 2024—representing roughly 20% of total annual global gold supply—bringing overall reserves to 36,000 tonnes, near the heights of the 1960s Bretton Woods era.
Gold prices surged by ~30% in 2024 and added another ~27% in early 2025, peaking at $3,500 per ounce.

2. Shifting Reserve Composition

The U.S. dollar still commands dominance at around 46%–58% of global reserves, but its share is gradually declining. Meanwhile, the euro remains stagnant at ~16%–20%, while gold continues to gain.

3. What’s Driving the Shift?

• Diversification: Roughly 66% of central banks say gold helps diversify portfolios; about 40% cite geopolitical risk protection .
• Sanctions Shielding: Gold is seen as a hedge against asset seizures or freezes following Russia’s 2022 invasion of Ukraine.
• Geopolitical Hedging: These dynamics—especially among nations aligned with Russia or China—are fueling continued gold accumulation.

4. Euro’s Roadblocks

Despite ECB President Christine Lagarde’s efforts, the euro has failed to capitalize on the dollar’s relative decline. Key impediments include:

• Fragmented capital markets and banking systems
• No unified safe asset (like shared sovereign bonds)
• Insufficient geopolitical influence

Lagarde states that structural reforms—unified capital markets, shared debt instruments, bolstering security ties—are essential for the euro to truly rise as a global reserve currency .

📈 Historical Context & Outlook

• Echoes of the Past: During the 1930s and 1970s—periods of destabilized reserve currencies—gold surged as central banks flocked to it. Today, gold’s share in reserves is nearing those historic highs.
• Future Trends: If gold prices remain elevated and geopolitical tensions persist, the current trajectory suggests continued reserve accumulation. Meanwhile, the euro must undergo deep structural strengthening to emerge as a viable contender to both the dollar and gold .

🧠 What This Means for Stakeholders

• Central Banks: Strategic rebalancing toward gold is now mainstream—a powerful tool for diversification and geopolitical insurance.
• Eurozone Leaders: With hopes of a “global euro moment” pinned on deepening markets, forging shared assets, and asserting geopolitical muscle, reforms are imperative.
• Investors & Analysts: These shifts underscore gold’s ascendant role—not just as inflation protection, but as a critical geopolitical hedge.

✅ Takeaways

• Gold’s rise to 20% of reserves marks a strategic pivot by central banks amid uncertainty and sanctions risk.
• Euro’s status remains mired by systemic limitations, even as policymakers call for bold reforms.
• Dollar dominance isn’t unimpeachable—but any lasting change hinges on deeper global resilience, whether in gold or currencies.