#MacroFriday: Gold surpasses euro in global central bank reserves

This week, the ECB published an interesting report on the international role of the euro. The main finding was that the role of the euro has remained fairly stable in the international monetary system over the past few years, especially in international payments and in the issuance of foreign loans and debt. The report also highlights the rise of the Renminbi in global trade finance, which is expected to soon overtake the euro as the second most used currency in global trade.

The graph from the report, which we include in our MacroFriday, illustrates the total global reserve holdings of central banks. Excluding gold holdings, the share of the euro in global reserves has remained stable around 20%, while the share of the US dollar has declined by 2% to 57,8%. When including gold, however, theshare in gold has surpassed that of euro reserves, driven both by the surge in gold prices and increased gold accumulation by central banks.

The ECB report stated: “Gold demand for monetary reserves surged sharply in the wake of Russia’s full-scale invasion of Ukraine in 2022 and has remained high. Moreover, concerns related to sanctions and the possible erosion of the role of major currencies were cited by some central banks in emerging and developing economies. One out of four such central banks referred to ‘concerns about sanctions’ or the ‘anticipation of changes in the international monetary system’ as determinants of their investment exposure to gold.” It is clear that geopolitics continues to be a key factor in global central banks’ allocation decisions.