Global reserves are undergoing a dramatic realignment as gold climbs to a thirty-year high, Bitcoin ETFs expand rapidly, and the U.S. dollar slides back to levels last seen in the Clinton era.
Summary
- Gold’s share of reserves hit 24% in Q1 2025, a three-decade high, while the dollar slipped to 42%, its lowest since the 1990s.
- Central banks boosted gold holdings to near 1960s levels, led by Poland, China, Turkey, and India, citing sovereignty and geopolitical risk.
- Dollar credibility is strained by 120% debt-to-GDP, nearly $1 trillion in annual interest, Fed policy uncertainty, and new U.S. tariffs.
- Dedollarization is advancing through local settlement systems, yuan- and euro-based trade deals, and BRICS efforts to expand national currency use.
- Bitcoin is gaining reserve-like traction, with ETF inflows topping $55 billion and volatility easing to 2.2 times gold.
Gold surges to three-decade high as dollar slips to 1990s levels
Fresh data for Q1 2025 reveals a critical repositioning in how the world stores its financial safety net.
Gold’s share climbed three percentage points to 24%, the highest level in three decades, while the U.S. dollar’s portion fell two points to 42%, a low not seen since the mid-1990s. The euro held steady at about 15%, keeping its third-place position in the global hierarchy.
Only a few years ago, in 2020, gold made up just 13% of total reserves and was often seen as a relic rather than a core tool.
The metal crossed 20% in late 2024, surpassed the euro, and now sits firmly as the world’s second most widely held reserve asset.
Amid this, data from the European Central Bank shows official gold holdings are nearing levels last recorded in the 1960s, reversing decades of post–Cold War drawdowns.
The dollar, although still dominant, is steadily losing ground. At the start of the century, it accounted for nearly 70% of global reserves, but by the end of 2024 that figure had slipped to 58%.
When gold is included in the comparison, the dollar’s effective share drops to 42%, close to where it stood during the Clinton administration.
The euro followed a different path. After its launch in 1999, it briefly rose into the low 20% range during the mid-2000s and appeared to challenge the dollar’s supremacy.
Structural weaknesses and recurring debt crises stalled that rise, leaving its share stagnant at about 15% without the buying momentum that has fueled gold’s resurgence.
Why central banks are buying gold
Behind the rise in gold’s share of global reserves is a set of motivations that go well beyond asset performance or historical value.
Central banks are treating it as a shield of financial sovereignty, useful in guarding against sanctions, war, and fragmentation of global markets.
The freezing of Russia’s reserves in 2022 triggered a rethink across capitals, and the European Central Bank later noted that gold demand surged after the invasion of Ukraine, highlighting its role as politically neutral wealth.
World Gold Council survey data show that around 59% of central banks consider trade conflicts or geopolitical risk important to their reserve strategy, especially in emerging-market banks (69%). At the same time, about 73% expect the U.S. dollar’s share of global reserves to fall over the next five years.
Amid this, Poland has taken the lead, adding 49 tonnes in Q1 2025 to bring total holdings to nearly 497 tonnes, surpassing its own goal of holding 20% of reserves in gold.
Governor Adam Glapiński explained the stance directly. “Gold will retain its value even when someone cuts off the power to the global financial system, destroying traditional assets based on electronic accounting records. Of course, we do not assume that this will happen. But as the saying goes, forewarned is always insured.”
He further added, “And the central bank is required to be prepared for even the most unfavorable circumstances. That is why we see a special place for gold in our foreign exchange management process.”
Meanwhile, China added 13 tonnes in Q1, pushing official holdings to around 2,300 tonnes, though many analysts believe the real figure is higher.
Turkey purchased 4 tonnes, India added 3 to reach 880, and steady buying has also come from Kazakhstan, Uzbekistan, Egypt, and Qatar.
Many of these countries are tied closely to China or Russia, a pattern the ECB has noted in its recent comments on reserve trends. The shared motive is a desire to limit exposure to reserves vulnerable to political influence.
The scale of these moves is striking compared with the past. In the 1970s, gold prices jumped after Bretton Woods collapsed, yet central banks were often net sellers.
Buying momentum only took hold after the 2008 financial crisis, led by emerging markets. The pace then accelerated, with net purchases above 1,000 tonnes in 2022, 2023, and 2024 — levels never seen before, even in the inflationary 1970s.
Moreover, surveys suggest the majority plan to keep increasing allocations in the coming year, a sign of how fractured and uncertain the global order has become.
Dollar’s fiscal and policy troubles
The global role of the U.S. dollar is beginning to face questions that were rarely raised in the past.
Federal debt has risen above 120% of GDP, climbing from about $27 trillion five years ago to more than $36 trillion today. Interest costs are nearing $1 trillion a year, equal to just over 3% of GDP, and have become the second-largest line in the federal budget after Social Security.
In late 2024, those payments were consuming close to one-fifth of federal tax revenues, a weight not seen in decades and one that is increasingly shaping how reserve managers judge the dollar’s future.
Concerns about fiscal pressures are compounded by the direction of monetary policy. Inflation has eased from earlier peaks yet remains above the Fed’s target.
The Fed raised rates aggressively in 2022 and 2023, then moved into a cutting cycle in 2024. In 2025, markets remain split on the next step.
Continued easing could support growth yet risks reviving inflation, while holding steady or reversing course would tighten conditions and slow the economy further.
The lack of clarity has unsettled foreign holders of dollar assets. In a recent survey, 70% of central banks named U.S. policy instability as a factor reducing their confidence, more than twice the share of a year earlier.
Trade policy has further aggravated the situation. In 2025, the White House introduced a sweeping tariff package that imposed a 10% duty on nearly all imports, 30% on goods from Europe and Mexico, and 50% on Indian exports in response to Russian oil purchases, alongside new restrictions on Chinese goods.
Such abrupt measures were read in many capitals as signs that U.S. economic policy had become more unilateral, and that reliance on the dollar carried political as well as financial risks.
The response can be seen in the steady advance of dedollarization.
Southeast Asia has built a local currency settlement system, bilateral trade in Asia, the Middle East, and Africa is increasingly priced in yuan or euros, and large emerging markets are urging companies to settle in domestic currencies.
China and Russia now conduct most of their trade in yuan and rubles, while dozens of countries have joined China’s Cross-Border Interbank Payment System as an alternative to SWIFT.
Even U.S. allies are making small adjustments, with trade finance data showing a gradual decline in the dollar’s share of invoicing and modest gains for the euro and yuan.
Within the BRICS group, leaders have framed greater use of national currencies as a long-term goal, describing it as a step toward a more balanced system.
The dollar’s dominance is not disappearing overnight, but the conditions surrounding it have changed.
Rising debt, unsettled policy, and protectionist trade moves are giving central banks stronger reasons to consider alternatives, and that shift is now visible in the choices they make.
Bitcoin as digital gold, alongside bullion
Alongside gold’s resurgence, attention has also shifted toward Bitcoin (BTC) as a modern counterpart.
Branded “digital gold,” it offers scarcity through a fixed supply of 21 million coins and operates outside government control, qualities that attract investors seeking stability during periods of uncertainty.
Adoption has taken a different form from gold. Central banks are building reserves in bullion, while Bitcoin’s momentum comes from private actors.
Institutional portfolios now hold crypto exposure on a scale that would have seemed unlikely only a few years ago, supported by the expansion of regulated products.
Spot Bitcoin ETFs have quickly become a major force in the market. Since early 2024, they have attracted more than $55 billion in net inflows, led by BlackRock’s IBIT, which now manages over $80 billion in assets.
Meanwhile, gold ETFs recorded about $38 billion in inflows in just the first half of 2025, showing strong interest in both assets but from different starting points.
Regulatory clarity has reinforced the trend. In the U.S., new legislation has confirmed Bitcoin’s position as a recognized asset class, giving institutions stronger grounds for participation.
Bitcoin’s price swings have eased in recent years. In August 2025, it was about 2.2 times as volatile as gold, compared with more than four times in earlier periods.
Analysts note a steady decline, with JPMorgan reporting that Bitcoin’s annualized rolling volatility dropped from nearly 60% at the start of the year to around 30%, the lowest level on record.
Taken together, the rise of both assets reflect that the U.S. dollar’s long-standing dominance is slipping, and the balance of global reserves is starting to tilt toward a more divided system.
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