Global central bank reserve managers are taking decisive steps to reduce reliance on the U.S. dollar amid rising geopolitical uncertainty and policy shifts. According to a new OMFIF survey covering around $5 trillion in reserves, nearly 40% of central banks plan to increase their gold holdings over the next decade, marking the strongest interest in five years, while favouring the euro and China’s yuan for near‑term diversification.
The dollar, long the cornerstone of global reserves, has slipped to seventh place in preference, with 70% of respondents citing U.S. political instability as a key deterrent. Despite this, projections suggest the greenback will still command about 52% of reserves by 2035, down from 58% today.
The euro is regaining appeal, with 16% of central banks planning to boost holdings in the short term. Analysts expect its share could climb back to 25% if the EU further unifies its bond market and deepens capital integration. The yuan is also gaining traction; forecasts predict it could triple its global reserve share to around 6% over the next decade, a sign of China’s growing influence.
Gold’s resurgence serves as a hedge against volatility. Central banks are on track for a fourth consecutive year of significant gold accumulation, with bullish forecasts driving prices higher.
This trend is prompting a re‑evaluation among portfolio managers, especially outside the U.S., who are reassessing exposure to dollar‑denominated assets. Europe‑based pension and insurance funds have already begun trimming their holdings, while Asian investors have pulled back in U.S. bond markets.
For the BFSI sector, this pivot has multiple implications: financial institutions must recalibrate reserve strategies, currency hedging, and asset allocation, while retail banks and wealth managers face shifting client preferences toward gold, euros, or even yuan instruments. Risk management frameworks will need to reflect a multipolar currency environment, balancing liquidity, returns, and geopolitical risks in increasingly diverse portfolios.
Looking ahead, central bank diversification signals a significant shift in global finance—one necessitating adaptability from institutions as monetary dominance transitions and asset strategies evolve.
