Gold never actually passed U.S. Treasuries as the world's preferred reserve asset – Fed's Weiss

Even though central banks have been ramping up their bullion purchases in recent years, a simple comparison of the value of U.S. treasuries and gold in countries’ official reserves is misleading, as gold’s price appreciation has been driven largely by private demand, while most official gold reserves are still held by countries that haven’t purchased any in over 50 years, according to Colin Weiss, Principal Economist for Global Financial Flows at the Federal Reserve. In 2025, world international reserves held in gold surpassed foreign official holdings of U.S. Treasury securities, a fact drawing attention from media and policymakers,” Weiss wrote in a Federal Reserve research note on Thursday. “Should this be interpreted as gold overtaking U.S. Treasury securities in its appeal as a reserve asset?” Weiss believes this is not the case, offering several reasons why “a comparison of world gold reserves and aggregate foreign official holdings of U.S. Treasury securities is problematic.” First, the rise in the market value of gold reserves since 2024 was primarily driven by a surge in gold prices from a jump in private sector demand,” he argues. “Second, the rise in the share of gold in global reserves is mostly accounted for by a handful of countries with large legacy holdings from the Bretton Woods era that have not accumulated gold in any meaningful amount since the 1970s—including the U.S., which cannot hold Treasury securities as international reserves.” Weiss writes that the dramatic increase in the market value of countries’ gold reserves since 2024 was fueled primarily by a sharp rise in private sector demand, which had the effect of boosting gold prices. “This surge in gold prices does not reflect a concurrent spike in central bank purchases,” he said. “While central bank purchases of gold likely increased substantially in 2022, these banks have only maintained that elevated pace since then. Rather, demand from private sector investors jumped in late 2024, manifesting in inflows to physical gold-backed exchange traded funds.” “Thus, while the spectacular rise in gold prices witnessed in 2025 likely required strong demand from both private and official investors, the demand from official investors in isolation would not have been sufficient to cause a surge in prices.” Weiss also analyzes the impact of including and excluding the United States’ own massive gold reserves in these calculations. “Foreign official holdings of U.S. Treasury securities by definition exclude the Federal Reserve as a holder, but the series for world gold reserves includes those held by the U.S. government,” he writes. “The U.S. is the largest holder of gold reserves, accounting for 22 percent of the world total, leading to world gold reserves substantially overstating gold's importance relative to U.S. Treasury securities in foreign governments' reserve portfolios.” “Excluding U.S. gold reserve holdings, world gold reserves were $0.8-$1.1 trillion below the headline gold reserve number throughout much of 2025 (red line in figure 1).” Weiss acknowledges that by the end of 2025, world gold reserves stood at $5.1 trillion, and even excluding the U.S., they totaled $4 trillion – still greater than the $3.9 trillion of foreign official holdings of U.S. Treasury securities. “Again, though, this largely reflects large valuation changes rather than any sharp uptick in central bank accumulation over the past 18 months,” he notes. “By June 2026, foreign official holdings of Treasuries again surpassed world gold reserves excluding the U.S. in dollar terms despite further increases in gold reserves as measured in fine troy ounces.” Weiss characterizes the overwhelming majority of the world’s central bank gold reserves not as a deliberate and strategic decision to diversify away from the U.S. dollar, but as an accidental relic of the Bretton Woods era. “Despite accumulation by many emerging market central banks beginning in 2008, most...