Gold tops euro as 2nd-largest reserve asset: What it means globally

Gold has overtaken the euro to become the world's second-biggest reserve asset as central banks continue to buy amid global uncertainty

Gold has officially surpassed the euro to become the world’s second-largest foreign exchange reserve asset, according to a recent report by the European Central Bank (ECB), as reported by The Financial Express.

 

Though not entirely unexpected, the development marks a shift in how global central banks are managing their reserves. Gold, traditionally seen as a safe-haven asset, has steadily gained prominence and now outpaces one of the most important fiat currencies globally.

 

According to the ECB data, the US dollar still leads the pack, making up 46 per cent of global reserves. But gold has now climbed to 20 per cent, pushing the euro down to third place at 16 per cent. This pivot sends a strong signal- central banks are backing bullion over paper.

 

 

This isn’t a passive shift either. Central banks are actively accumulating gold.

 

Over the last three years—2022, 2023, and 2024—central banks have each year bought over 1,000 tonnes of gold. That’s more than double the annual average of 400-500 tonnes seen through the previous decade.

 

Global official gold holdings have now touched 36,000 tonnes, fast approaching the historic peak of 38,000 tonnes set in 1965, during the Bretton Woods era. The US Federal Reserve continues to hold the largest stockpile at 8,133.46 tonnes. Notably though, it made no fresh purchases in the first quarter of 2025. 

 

India’s central bank, meanwhile, is quietly building its reserves. According to World Gold Council data, the Reserve Bank of India held 876.18 tonnes as of December 2024. It added 3.42 tonnes in the March 2025 quarter, taking the total to 879.60 tonnes.

 

And the gold rush isn’t ending any time soon.

 

A new World Gold Council survey shows that 95 per cent of central banks expect their gold reserves to increase over the next 12 months. Interestingly, 43 per cent say they plan to actively add to their gold holdings during the same time.

 

Holding gold as a reserve asset is nothing new. But what’s changed is the intensity of the buying—and the reasons behind it. Central banks are increasingly wary of rising geopolitical tensions and currency risks. In such uncertain times, gold’s reputation as a stable store of value shines even brighter.

 

The US dollar continues to dominate reserve holdings, but its share is slowly slipping. The International Monetary Fund (IMF) has also acknowledged a gradual decline in dollar dominance.

 

What began as a cautious bet on gold back in 2022 is now shaping into a deliberate, long-term strategy.

 

Currently, gold is trading at $3,350 per ounce—just 4 per cent off its all-time high of $3,500, touched on April 22. The rally, which began in October 2022 from a base of around $1,500, has seen a sharp 120 per cent surge. However, some market analysts believe the metal may be entering a period of ‘fatigue’ in the absence of new catalysts.

 

Still, gold has delivered strong returns—over 20 per cent in both 2023 and 2024. In 2025 so far, it’s up another 27 per cent. Much of the recent momentum has been triggered by US President Donald Trump’s proposed tariffs, which are stoking fears of a new trade war. The impact of reciprocal tariffs, expected to roll out in the second half of 2026, remains uncertain.

 

Tensions in the Middle East, particularly the unresolved Israel-Iran conflict, have only added to gold’s appeal. Any direct involvement by the US could escalate the crisis, potentially shaking financial markets. In such scenarios, gold tends to be among the few assets that hold ground.

 

What does all this mean for everyday investors?

 

Financial advisors typically recommend holding around 10 per cent of a portfolio in gold. But with prices at historic highs, is it now the right time to start?

 

Experts believe that for long-term investors, systematic exposure to gold remains a smart move. Prices may see corrections in the short term—as they do with any asset—but gold continues to offer a reliable hedge against uncertainty and volatility.