A record number of central banks are expected to increase their gold holdings over the next 12 months as global volatility continues to rock markets.

Nearly 90 per cent of reserve managers anticipate central bank holdings to continue rising in the wake of the precious metal becoming the top reserve asset, overtaking US government treasuries, according to the latest survey from the World Gold Council.

Reserve manager’s bullish outlook is also reflected in the central bank’s own reserve plans, with a record 45 per cent saying they expect to increase their institutions’ gold holdings over the time frame, up from 43 per cent last year.

Banks also anticipate long-term accumulation of gold, with 84 per cent believing the asset will hold a higher share of total reserves in five years, up from 76 per cent, with banks across developed and emerging markets predicting an uptick.

Central banks have been stockpiling gold in recent years in a bid to secure alternatives to the US dollar, the world’s unofficial reserve currency.

Banks cited ongoing geopolitical uncertainty amid the conflict in the Middle East, inflation concerns, and potential trade conflicts as reasons for their decision to increase their reserve levels.

Over eight in ten also acknowledged gold’s value as a portfolio diversifier, which reinforces its appeal as a strategic reserve asset.

Souring on the dollar

The scramble to secure assets away from the dollar was also reflected in banks’ souring sentiment towards the currency.

While it maintains its position as the dominant reserve currency, findings from the International Monetary Fund (IMF) show its hold is slipping, with managers expecting this to continue.

Nearly 75 per cent expect its share to be lower five years from now, with both developed and emerging central banks sharing this view.

Shaokai Fan, global head of central banks and head of Asia-Pacific, said: “A record number of respondents plan to add gold to their own reserves in the next year, while a large majority expect global official sector holdings to keep rising. 

“What stands out is the shift in how central banks think about gold. Fewer see it as a legacy holding; more see it as an active, strategic allocation in an environment defined by geopolitical uncertainty and reserve diversification.”

Leaving main markets

The Bank of England maintained its spot as the most popular location for vaulting, but nearly half of the central banks surveyed admitted they had relocated their holdings from the main gold markets to store domestically.

In the past 12 months, 9 per cent indicated they had increased their domestic storage, while 10 per cent indicated it had diversified its overseas storage locations.

Looking ahead, more central banks appear to want to change their storage arrangements, with seven per cent confirming their intention to increase their domestic storage in the next year.

Institutions are also opting to actively manage their own gold reserves to enhance returns and mitigate potential risks.