Gold overtakes euro as second-largest global reserve asset: ECB
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The news: The European Central Bank (ECB) has said that gold surpassed the euro as the second largest global reserve asset at market prices in 2024.
The numbers: By the end of 2024, gold bullion amounted to roughly 20% of global official reserves (comprised of foreign exchange and gold holdings), topping the euro’s 16%.
A report by the ECB on Wednesday said that central banks purchased more than 1,000 tonnes of gold in 2024, double the average annual amount seen in the previous decade. Global holdings of gold by central banks now stand at 36,000 tonnes, close to the all-time high of 38,000 tonnes reached in 1965 during the Bretton Woods era.
The price of gold has jumped almost 62% since the beginning of 2024, hitting an all-time high in April of USD3,509.90 ($5396.90). gold futures in New York were most recently up 0.5% at $3,361.70 a troy ounce.
The context: The ECB report said that gold demand for monetary reserves surged sharply after Russia invaded Ukraine in 2022 and has remained high since then.
“Although current data indicate no significant changes in the international use of the euro, it is important to remain vigilant,” the ECB warned.
“Central banks continued to accumulate gold at a record pace and some countries have been actively exploring alternatives to traditional cross-border payment systems.”
The ECB said that in addition to the link between geopolitical alignments and shifts in invoicing currency patterns in global trade, new challenges to the international role of the euro have emerged including the use of cryptocurrencies.
Despite these pressures, the ECB said that the global appeal of the euro is underpinned by sound policies in the euro area and strong, rules-based institutions. “Upholding the rule of law remains essential for maintaining, and potentially increasing, global trust in the euro,” said ECB president Christine Lagarde.
Lagarde added that the improvement of cross-border payment systems between the euro and other currencies will increase resilience. Noting the role of the digital euro, Lagarde said that solutions for settling wholesale financial transactions recorded on distributed ledger technology platforms in central bank money will also increase the efficiency of European financial markets and the global appeal of the euro.
The sources: ECB press release, ECB report
