Gold as a Reserve Currency

According to the European Central Bank (ECB) report released in June 2025, gold as a reserve currency has officially surpassed the euro to become the second-most held reserve asset globally.

 This significant development in global finance marks a shift in how central banks structure their currency reserve diversification strategies, especially amid ongoing geopolitical tensions, high inflation, and instability in the value of fiat currencies.

Gold as a Reserve Currency

The concept of gold as a reserve currency isn't new — gold has long served as a haven asset for global economies.

However, the latest data reveals a rapid increase in central banks holding gold, as confidence in the euro and even the U.S. dollar faces growing scrutiny.

Key Figures:

• Gold’s share in global reserves (2024): 19%

• Euro’s share: 16%

• U.S. dollar remains top: 47%

• Main buyers: Central banks, especially from emerging economies

• Central banks now account for over 20% of global gold demand

The ECB report highlights that the role of gold in the global economy is expanding. As a result, more countries are treating gold as a reserve currency to hedge against inflation, protect against sanctions, and secure long-term value.

Why Is Gold Considered a Reserve Currency?

There are several reasons why gold is considered a reserve currency by global financial institutions:

1. Gold reserves are not subject to depreciation like paper currencies.

2. Unlike fiat currencies, gold holds intrinsic value and is universally accepted.

3. During periods of inflation or geopolitical unrest, gold acts as a safe haven asset.

4. Central banks use gold as a reserve asset to avoid overreliance on politically influenced currencies like the dollar or euro.

This has led to an increased global trend of gold-backed currency considerations, particularly in economies that fear exposure to U.S. economic sanctions.

Impact of Geopolitical Tensions on Gold Reserves

Recent events — such as the Russia-Ukraine conflict, U.S. trade sanctions, and global market instability — have pushed countries to reevaluate their currency reserve strategies. In this climate, gold as a reserve currency offers resilience.

• Russia and China have notably increased their gold reserves.

• Gold demand has surged in emerging markets, signaling a potential shift from fiat to gold reserves among central banks.

• The difference between gold and the US dollar as reserve assets lies in their source of value: gold is tangible and inflation-resistant, while fiat relies on government stability.

Gold Reserve Trends in Emerging Economies

The gold reserve trends in emerging economies show that:

• Diversification is key. Countries are no longer comfortable holding only dollars or euros.

• Many economies now back up their currencies with gold.

• As inflation and global unrest continue, the value of gold in central bank reserves is expected to remain significant.

Will Gold Demand Continue to Rise?

Despite gold reaching its highest global reserve level since the 1960s, analysts warn that central bank demand may slow down:

• Volatile gold prices affect buying decisions.

• Some economies may reach saturation in their gold holdings.

• Yet, the concept of gold as a reserve currency is likely to remain stable, if not grow slowly over time.

For SSC Aspirants: Why This News Matters

Gold as a reserve currency is a relevant current affairs topic for exams like SSC CGL, CHSL, IBPS, and Railways. 

Understanding the historical role of gold in national reserves and the current trends in the global economy can help you answer both static GK and dynamic current affairs questions.

Final Thoughts

The rise of gold as a reserve currency signals a strategic transformation in global economic thinking. With increasing central banks holding gold and reducing dependence on fiat currency, the global financial system is shifting toward more tangible, stable assets. 

As countries diversify their global reserves, the benefits of holding gold in central bank reserves become even clearer.

For SSC aspirants and curious readers alike, this is more than just news — it's a glimpse into the future of monetary policy and global financial security.