Central banks in emerging markets are increasing gold reserves as trust in the U.S. dollar declines, pushing bullion prices to record highs amid geopolitical tensions and a volatile financial landscape.
Global Shift Away from the U.S. Dollar
New Delhi: The dominance of the U.S. dollar as the world’s reserve currency is gradually declining. Although the dollar still holds a majority share in global foreign-exchange reserves, its proportion has fallen steadily over the past two decades, from around 71% in 1999 to 59% by 2021, according to the International Monetary Fund (IMF).
This decline reflects a deliberate diversification by countries seeking alternatives to dollar-denominated assets due to concerns over geopolitical instability and financial unpredictability.
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Emerging-market economies, in particular, are leading this shift. Rather than abruptly abandoning the dollar, these nations are slowly reallocating their reserves, aiming to reduce dependency on a single currency and hedge against potential financial shocks.
A major beneficiary of this trend is gold. Unlike fiat currencies, gold is not tied to any government, carries no credit risk, and cannot be frozen or sanctioned, making it a neutral and secure store of value.
Emerging-market central banks in Asia, West Asia, and Eastern Europe have actively increased their gold holdings while reducing marginal exposure to U.S. Treasury bonds.
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In 2024 alone, central banks globally added 1,045 tonnes of gold, according to the World Gold Council. This surge in demand has contributed to a volatile bullion market, with gold reaching an all-time high of $5,598 per ounce before correcting to $4,942 on January 30, 2026.
Despite this sharp drop, gold prices remain elevated, up over 13% for the month, reflecting strong underlying demand.
Countries in the BRICS bloc, especially China and India, are at the forefront of de-dollarisation strategies. China’s central bank added gold for the 14th consecutive month in December 2025, bringing its total holdings to 2,306 tonnes, about 8.5% of its reserves.
India’s Reserve Bank increased its gold holdings to 880.8 tonnes, valued at roughly $108 billion amid rising prices. These moves show a long-term strategy to reduce reliance on the dollar and strengthen financial independence.
The U.S. dollar has faced significant fluctuations, partly due to statements from former President Donald Trump, who downplayed concerns over dollar weakness. On January 27, 2026, the dollar fell sharply following his remarks, hitting four-year lows. However, it rebounded slightly by January 30 as markets priced in potential policy changes under a new Federal Reserve chair nominee, Kevin Warsh.
Even small shifts in the global $12 trillion reserve system can have enormous effects. A one-percentage-point move away from the dollar can redirect hundreds of billions into alternative assets, primarily gold.
While gold has surged, analysts caution that such momentum may lead to corrections of 20–25% if geopolitical tensions ease or profit-taking accelerates.
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In essence, the global pivot toward gold is less about sudden currency shifts and more about a calculated move by central banks to safeguard wealth and mitigate risks in an increasingly unpredictable geopolitical and financial environment.
