Surpassing the Euro, challenging the Dollar! Gold accounts for as much as 18% of global reserve assets

Gold "rises" again, surpassing the euro and challenging the dollar.

Gold has not only become the hottest asset of the year, but its position in international reserves has also been rising. According to media data on Friday, since 2009, central banks around the world have been buying gold in large quantities, and with the rise in gold prices, its share in global international reserves has been expanding. By the end of 2023, gold's share in global reserve assets has climbed to 18%, surpassing the euro's 16% share.

Looking at the proportion of foreign exchange reserves excluding gold, starting from the launch of the euro in 1999, the share of the dollar in global reserves has slowly declined from a high of 72% in 2001 to 58% in 2023.

If gold is taken into consideration, analyzing the distribution of various reserve currencies between 1899 and 1935 (including legal tender and gold), as well as complete distribution data from 1950 onwards, reveals:

Apart from showing a gradual decline in the position of the dollar, more importantly, it reveals the historical balance between gold and legal tender.

In the international monetary system, the dominant position originally belonged to gold, not the dollar.

Even during the period when the pound sterling was considered the world's reserve currency, gold's share in international reserves was far ahead.

By focusing only on gold and the dollar, it can be seen that the two have diverged in trends.

As shown in the above chart, the share of the dollar in total reserve assets in 2023 has dropped to 48%. Analysis indicates that this is due to a decrease in trust in "credit assets" (legal tender), concerns about asset bubbles, escalating conflicts, and inflation fears, while at the same time, the share of gold is expanding.

Based on estimates of official gold reserves, including undisclosed gold purchases by central banks, the share of gold in total reserves in 2023 has risen to 18%, a significant increase from 11% in 2008, surpassing the euro which has been stagnant at 16%.

Analysis suggests that given the various problems plaguing legal tender are difficult to resolve quickly, the possibility of gold surpassing the dollar and becoming the world's top reserve asset in the next decade cannot be ruled out:

Gold is at the beginning of a multi-year bull market, as there is currently excessive trust in "credit assets," leading to capital flowing from various national currencies, bonds, and stocks to gold. The increasing share of gold in international reserves reflects this trend.