Central banks around the world are gradually loosening their grip on the US dollar and turning to gold instead. The latest report from the World Gold Council (WGC) underlines this trend, suggesting that banks will keep stacking the precious metal in their reserves and diversifying their holdings. The shift is a clear sign that gold is increasingly being treated as a credible alternative to the dollar.
Buying Spree Since 2022 Has Paid Off Handsomely
For several developing nations, the bet has been highly rewarding. The accumulation spree began in 2022, and since then these countries have booked billions in profit. The Spot XAU/USD index has climbed close to 140% over that stretch, effectively doubling their investments in five years.
Sitting on dollars, by contrast, carries its own price tag. It exposes economies to the twin risks of rising national debt and inflation. Many countries now see moving their reserves away from the dollar as the only real way to shield their economies from the fallout of America's decisions.
84% of Surveyed Officials Expect Gold's Share to Rise
The WGC survey drew in officials from 76 banks. Of them, 84% said gold accumulation would keep increasing, while 74% expected the share of the US dollar in central bank reserves to fall. The numbers make the direction of travel plain, with the dollar being given less weight than gold and de-dollarization gathering momentum.
Worries Go Beyond the Dollar to the Fed's Independence
The concerns of emerging economies are not limited to debt stability. These nations are also uneasy about the independence of the Federal Reserve. US President Donald Trump has been pulling the Federal Reserve into politics, stripping away its independent shield. Trump has also been a vocal opponent of de-dollarization, warning countries of serious consequences if they walk away from the US dollar.
“All those factors might be on the minds of central bankers as they think about the composition of the reserve assets going forward,” Shaokai Fan, global head of central banks and head of the Asia-Pacific at the World Gold Council, told TrendKia.
The Process Could Accelerate After 2029
Analysts reckon de-dollarization could shift into top gear once Trump's tenure ends in January 2029. If that happens, the countries that have invested in gold may see their bets pay off even more handsomely over the next three years.
