Central Bank Gold Purchases Double Since 2010, Outpacing US Treasuries
FTSE Russell notes central banks now hold more gold than US Treasuries, decoupling metal prices from rising bond yields.
Key points
- Central banks hold more gold than U.S. Treasuries at current valuations, altering market dynamics.
- Recent central bank gold purchases are more than double the 2010-2021 average levels.
- The U.S. dollar's share of global reserves has fallen from 70% to roughly 56%.
Central banks collectively hold more gold than U.S. Treasuries at current valuations, shifting market dynamics. This structural change reduces the sensitivity of gold prices to rising bond yields.
Indrani De, Head of Global Investment Research at FTSE Russell, explains this shift in an interview with Kitco. She states that official sector demand is no longer driven by opportunity cost calculations.
Official sector buying outpaces previous decades
Central banks were net sellers of gold from 2000 until the Global Financial Crisis. They have since become net buyers, accelerating their pace significantly in the last three years.
Recent annual purchases are more than twice the average level recorded between 2010 and 2021. This volume creates a demand base that ignores traditional yield-based allocation logic.
Dollar reserve share declines steadily
The U.S. dollar's share of global foreign-exchange reserves has dropped from just above 70% in 2000. It now sits between 55% and 57%, reflecting a gradual diversification trend.
De clarifies that this decline does not signal a loss of faith in the dollar. No viable alternative of comparable scale exists to replace the dollar's dominant role.
Fiscal dominance drives global capital scarcity
Rising yields stem partly from fiscal concerns across developed economies, a trend De describes as fiscal dominance. This environment shifts capital toward productive uses like artificial intelligence and infrastructure.
Capital is becoming scarcer as productive investment opportunities expand globally. Gold retains its function as a hedge against inflation and geopolitical risk despite these headwinds.
