Overview

Central banks all over the world are selling off a part of their U.S. Treasury securities while at the same time, large amounts of gold are being bought into their reserves. This is a turning point in foreign reserves management that will probably take decades to recognize. In the past, the long-term Treasury-bonds were regarded as the safest place to invest global reserves. However, the combination of economic uncertainty, geopolitical tension, and the dollar's future dilemma has prompted central banks to switch their strategies towards gold.

Treasury Sell-Off and Dollar Concerns

The perception of U.S. government debt as the safest of all investments has lasted for decades. However, recently this view has changed. A number of central banks have already started to unload parts of their U.S. Treasuries holdings. Some countries indicated cuts amounting to tens of billions of dollars in 2025 only. The analysts claim that this is due to the fact that US debt levels, inflation, and the monetary policy independence are among the major reasons for the concerns voiced by the market.

A key factor behind this movement is the fear of government collapse and, consequently, the currency losing its purchasing power. The increasing national debt coupled with disagreements in politics regarding budget priorities have resulted in the confidence in Treasury yields being shaken. Hence, the preference of central banks is for assets that do not share the same issuer or default risk as government bonds and thus are effectively risk-free.

Record Gold Purchases by Central Banks

The downfall of Treasury holdings has been accompanied by the skyrocketing of gold holdings. The World Gold Council has reported that central banks have kept up gold purchases to the tune of more than 1,000 tonnes every year for the past several years. Some institutions kept on buying gold even in the year 2025 when the prices reached their highest levels. This represents a drastic turnaround from the previous decades when central banks used to sell gold at times to invest in bonds.

Nowadays, gold is very often considered to be a reserve asset that should be held strategically because it can maintain its value even in times of economic hardships. Its attractiveness has been further supported by the geopolitical factors like the uncertainty around conflicts in Europe and the Middle East that have resulted in the physical bullion market being more active than ever before.

Historic Reserve Composition Shift

Central banks have turned to gold over U.S. Treasury securities for their reserves for the first time since the mid-1990s. The global gold reserves held by the official institutions are now more than 36,000 tonnes, which is in many cases more in value and weight than Treasuries. This milestone is a sign of a wider trend of moving away from the reliance on paper assets and towards the use of physical assets that are stable throughout history as storage of value.

Key Drivers and Outlook

Several factors contributing to this shift are pointed by the experts:

 

• Political risks that could erode the trust in assets denominated in dollars.

 

• Countries' attempts to get rid of dollar dominance by setting up varied reserve portfolios.

 

• Rise in prices and uncertain government fiscal policy that cause lack of confidence in national bonds.

 

The position of gold as a strategic asset is expected to remain; this is so because the central banks are expected to keep or even increase their holdings of gold up to 2026. This trend will have a major impact on global finance, including the raising of Treasury yields, and the U.S. government will continue to face challenges regarding borrowing costs.