Central Banks Fuel Gold Rally as De-Dollarisation Accelerates

Central banks' unprecedented purchases of gold indicate a significant shift in global currency reserves and a weakening of the US dollar's dominance, according to an analysis by investment firm Man Group PLC.

Gold prices reached a new record high last week. While investors have sought gold as a safe haven amid growing geopolitical uncertainty, the buying activity from central banks has emerged as a key driver. Analysts suggest that central banks are diversifying their reserves due to increasing concerns over reliance on the US dollar.

This trend reflects a broader transition towards a multipolar world and a potential end to the Pax Americana era. Although the US dollar has been the cornerstone of international trade and reserves for decades, its position has begun to erode. US fiscal policy and, notably, the use of the dollar as an instrument for sanctions have contributed to this shift.

Russia's invasion of Ukraine in 2022 acted as an accelerant, as central banks witnessed the rapid freezing of Russia's dollar reserves. Since 2009, central banks have been net buyers of gold, but recent purchasing activity has been at record levels. In 2024, central banks added over 1,000 tonnes to their reserves.

According to a survey by the World Gold Council, nearly 70% of central banks plan to increase the share of gold in their reserves over the next five years. While the dollar remains central to global finance, its role is no longer guaranteed, and gold is emerging as an alternative store of value in this evolving landscape.