Gold has firmly established itself as the second-largest global reserve asset after the U.S. dollar, according to a new report from the European Central Bank (ECB). The findings highlight the crucial role central banks have played in supporting gold’s remarkable rally over recent years.

Driven by persistent geopolitical uncertainty, inflation concerns, and a need for diversification, central banks now hold gold at levels not seen since the 1960s. As of 2024, gold accounted for 19% of global official reserves—surpassing the euro and second only to the U.S. dollar’s 47% share.

The ECB’s analysis noted a growing appetite for gold, especially among emerging and developing countries, amid rising concerns about sanctions and the long-term reliability of major currencies. Central banks now represent more than 20% of global gold demand, a significant increase from roughly 10% in the 2010s.

While recent months have seen some cooling in central bank purchases—Chinese buying in particular has slowed—the broader case for gold remains strong. Analysts expect reserve allocations to gold to remain resilient, supported by long-term demand for safe-haven assets and strategic diversification away from the dollar.

Despite short-term fluctuations, gold’s appeal as a stable store of value continues to attract attention. According to market experts, uncertainty in global trade policy and monetary stability may further reinforce gold’s role in sovereign reserve strategies.

The ECB also pointed out that historical trends suggest gold supply could continue to respond to increased demand, potentially supporting future market growth.

In a world marked by volatility and shifting financial alliances, gold’s strategic importance as a reserve asset shows no sign of fading.

Source: CNBC