There has been a large increase in the share of gold in central bank purchases since 2009 at the expense of fiat currencies. In fact, by the end of 2023, gold has overtaken the euro, while the next currency to challenge is the US dollar. The dollar’s share of total reserves appears to be slowly declining, from a peak of 72% in 2001 to 58% in 2023.
Often, when financial analysts draw graphs about the distribution of international reserves, they focus on foreign exchange (omitting gold) starting in 1999, that is, with the advent of the single European currency.
Based on these charts, the dollar’s share of total reserves appears to be slowly declining, from a peak of 72% in 2001 to 58% in 2023. Furthermore, there appears to be no currency competing against the dollar. But why not include gold in your valuations?
Often, when financial analysts draw graphs about the distribution of international reserves, they focus on foreign exchange (omitting gold) starting in 1999, that is, with the advent of the single European currency.
Based on these charts, the dollar’s share of total reserves appears to be slowly declining, from a peak of 72% in 2001 to 58% in 2023. Furthermore, there appears to be no currency competing against the dollar. But why not include gold in your valuations?
By combining multiple sources, you can get a glimpse of the spread of reserve currencies from 1899 to 1935 (both fiat and gold) and a complete picture starting in 1950.
Instead of showing the fall of the dollar, the historical balance between gold and fiat currencies is revealed. It is not the dollar that normally backs the International Monetary System, it is gold.
Gold made up the majority of international reserves, even when sterling was the world’s reserve currency, before the dollar. On a chart covering more years but only gold and the dollar, the reign of the latter becomes more distinct.
The chart above shows that the dollar’s share of total reserves has fallen to 48% in 2023, due to declining confidence in “credit assets” (fiat currencies), due to bubbles, war escalation and inflation. On the other hand, gold is gaining ground.
Based on calculations of official gold reserves that include secret purchases, for example by China’s central bank, gold’s share of total reserves reached 18% in 2023, up from 11% in 2008. Gold has currently surpassed the euro, the which is stuck at 16%.
And since the problems plaguing fiat currencies aren’t going away anytime soon, it’s possible that gold will outperform the dollar over the next decade as well.
