A clear majority of central banks around the world now see gold becoming a more prominent reserve asset, suggesting the de-dollarization trend will continue in the coming years.
Meanwhile, the survey found that half of respondents expect the dollar to account for 40%-50% of reserves in five years.
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That would mark a drop from the third quarter, when the dollar made up 51% of reserves, with gold making up 15% of reserves.
“The rationale to increase gold holdings therefore comes as no surprise since ‘interest rate levels,’ ‘inflation concerns,’ and ‘geopolitical risks’ continue to be the leading factors in central bankers’ reserve management decisions as they were last year,” WGC wrote.
Central banks have been buying gold aggressively, especially after Russia’s invasion of Ukraine last year triggered sanctions on Moscow that froze its foreign currency holdings.
That has led to more countries trying to reduce their vulnerability to the dollar in their own economies, with gold emerging as a top alternative.
The trend has continued this year, as the first quarter saw central bank gold purchases shoot up by 176% from a year ago.
However, there is a division between the outlooks of central banks in advanced economies and those of developing nations, with emerging nations more optimistic about gold’s future role.
For instance, these banks led expectations for a dollar reserve decline, whereas many advanced economies forecast the greenback’s levels to remain unchanged.
Emerging markets and developing economy “central banks in particular have expressed continuing concerns about the impact of geopolitics on their reserve management decisions, with many valuing gold as a way to manage these risks,” WGC wrote.