Global Central Banks Plan First Net Reduction in USD Holdings in Three Years, Increasing Gold and Euro Allocations
Alina Collins
An OMFIF survey shows 4% of central banks plan to cut dollar exposure over the next two years — the first net reduction signal in three years; gold and the euro are the primary beneficiaries, marking a shift from talk of reserve diversification to actual reallocation.
What is actually changing with the dollar?
90 public investment institutions — including 74 central banks — were surveyed. 4% plan to reduce dollar exposure in the next one to two years.
This is the first "net decline" in dollar allocation in three years — more institutions plan to trim than to add.
This means → the magnitude is small, but the direction has reversed. For three years, central banks were net-adding or holding steady on the dollar. The balance has now tipped the other way for the first time.
The dollar still accounts for 58% of surveyed holdings, down just two percentage points from 60% last year. In plain terms = the dollar remains the dominant reserve currency by a wide margin, but its share is being chipped away at the edges.
Why are central banks stacking up on gold?
The share of central banks holding physical gold rose from 71% a year ago to 82% — a survey record.
About 30% plan to add more gold over the next two years. The top reason: geopolitical risk protection.
This means → gold is no longer just a "store of value" in central-bank eyes. It functions as a geopolitical insurance policy — when sanctions risk rises, gold cannot be frozen by any single country.
On price outlook, 61% of central banks expect gold to trade between $5,000 and $6,000 per ounce by June 2027; only 28% see current prices as too high. Spot gold was at $4,155.63/oz at the time of reporting.
Why is the euro the most favoured alternative?
29% of institutions plan to raise euro holdings over the long term, making the euro the most popular currency for new allocation in this survey round.
If the EU becomes a permanent bond issuer — effectively creating a "eurozone sovereign bond" — 55% of eligible central banks say they would further increase euro-denominated reserves.
In plain terms = the euro's bottleneck has always been the lack of a unified sovereign bond. Once that piece falls into place, its appeal as a reserve asset jumps a level.
The dollar is the only major currency facing net reduction. The DXY index stood at 100.953 on the day, and Société Générale forecasts it will rise to 103.6 by year-end. This reflects a key distinction: short-term trading price and long-term reserve allocation can move in completely opposite directions.
What does this mean for ordinary investors?
In the OMFIF report's own words, central banks are "adjusting carefully, testing new tools, and diversifying where possible" — not abandoning the dollar, but systematically widening the reserve basket.
This means → the long-term demand floor for gold and the euro is being structurally raised by central-bank allocation behaviour, independent of short-term price swings.
This reflects the pace of change in global reserves: not an overnight upheaval, but a one-to-two-percentage-point shift each year — yet once the direction is set, it is very hard to reverse.
Content is for reference only, not financial advice.