Gold has become the world's largest reserve asset, surpassing U.S. Treasury bonds for the first time in 30 years!

As gold prices surge and central banks embark on aggressive buying sprees, gold has officially surpassed U.S. Treasury bonds, becoming the world's largest reserve asset for the first time in thirty years. This marks a significant moment for the global financial system, highlighting the acceleration of global capital flows into safe-haven assets against a backdrop of fiscal sustainability concerns and rising geopolitical risks.

According to the latest data from the World Gold Council (WGC), assuming the size of central bank gold reserves remains unchanged at year-end and is calculated at year-end prices, the value of official overseas U.S. gold reserves has reached $3.93 trillion. This figure has officially exceeded the scale of official overseas holdings of long- and short-term U.S. Treasuries, which was close to $3.88 trillion as of October. The last time foreign institutions held more gold than U.S. Treasuries was back in 1996. This structural shift not only reflects the robust surge in gold prices but also reveals deep adjustments in the allocation of global reserve assets.

This reversal coincides with a year-end rebound in gold prices and strong performance at the start of 2026. Following nearly a 70% increase in 2025, gold continued its upward momentum in the first week of 2026, once touching $4,500 and staying near that level, up 3.6% for the week. Geopolitical tensions continue to boost its appeal as a safe-haven asset.

Analysts point out that this marks a fundamental change in the structure of global reserve holdings. Joe Kalish, Chief Macro Strategist at NDR, noted that as trust in fiat currencies declines, the value of gold reserves held by non-U.S. countries is rapidly catching up with and ultimately surpassing the value of their U.S. Treasury holdings. This trend means that countries are reducing their exposure to the U.S. financial system, driven both by concerns about U.S. dollar depreciation and risks of assets being frozen or sanctioned by the Trump administration.

Structural Rotation in Reserve Assets

Despite high gold prices, central banks have not stopped accumulating gold reserves. Data from the World Gold Council shows that U.S. overseas official global gold reserves have exceeded 900 million troy ounces. This persistent buying behavior indicates that policymakers are increasingly prioritizing gold as a core reserve asset.

For analysts, this phenomenon represents a structural shift in global reserve holdings. Compared to traditional fiat currency assets, gold is viewed as a safer alternative with no counterparty risk. In his research report, Kalish admitted:

"Three months ago when I first discussed this topic, the gap between the two was still obvious. But now, based on estimates and current prices, the gap has disappeared."

Over the past four years, foreign central banks have accelerated their purchase of gold, aiming to shield themselves from the potential negative spillover effects of U.S. geopolitical events. J.P. Morgan warned in a report last year that intensifying polarization in the U.S. could threaten its governance capacity, thereby undermining the U.S. dollar's foundation as the world's safe-haven asset— a trend that is hastening the so-called "de-dollarization" process.

Wall Street Split on the Outlook

Although the rise in the status of gold reserves has largely benefited from the 66% increase in gold prices last year, there remains debate in the market about the future direction of price movement. The long-term trend for gold depends on multiple factors, including U.S. monetary and fiscal policy. Low interest rates and high inflation typically increase gold's appeal, while the performance of the U.S. dollar and whether central banks' gold-buying spree continues are also key variables.

Currently, Wall Street is divided on the outlook for gold. Most institutions are optimistic about gold prices, with UBS recently upgrading gold to "overweight." This perspective suggests that in the face of potential governance risks and fiscal uncertainty, foreign governments are hedging risk by increasing gold allocations—such asset rotation serves as a defensive adjustment to the existing dollar-dominated global financial framework.

However, a few institutions hold the opposite view. Capital Economics expects gold prices to weaken in 2026. The firm states, "The recent surge in gold prices has been mainly driven by retail investor demand in the West, and such demand may quickly fade." Capital Economics specifically notes that if their forecast that Fed rate cuts will be less than the market expects is correct, gold may face downward pressure. In fact, as investors took profits, gold prices saw a certain degree of pullback on Wednesday.

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