Gold's share of global "foreign exchange gold reserves" has risen to 30%. If it matches the US dollar, the gold price would need to rise to $5,790.

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The status of gold is undergoing significant changes in the global reserve asset landscape.

According to Zhuifeng Trading Desk, the latest research from Deutsche Bank shows that the share of gold in global "foreign exchange + gold" reserves has risen to 30%. If gold is to reach parity with the dollar in terms of share, with current holdings unchanged, its price would need to rise to $5,790 per ounce. This calculation offers a new theoretical perspective for the market to understand gold's long-term value.

The core driving force behind the rise in gold's reserve status is the strong desire of global central banks to increase their holdings. A recent survey by the World Gold Council found that the vast majority of reserve managers expect the total holdings of gold by central banks to continue increasing. Not only has this trend been an important driving force behind strong gold prices in recent years, it also indicates that future gold demand will remain robust.

If Gold Matches the Dollar's Share, Price Needs to Rise to $5,790

According to a report by Deutsche Bank analyst Michael Hsueh published on October 17, gold's share in global central bank "foreign exchange + gold" reserves has rapidly risen from 24% at the end of June this year to the current 30%. Over the same period, the dollar's share has fallen from 43% to 40%. This dynamic reflects the continuous strengthening of gold's appeal as a reserve asset, while the dollar's dominance is comparatively weakening.

The report further presents a pricing projection: if gold is to be on par with the dollar in the above-mentioned reserve category, its price would need to reach $5,790 per ounce. In this scenario, assuming that central bank gold holdings remain unchanged, gold and the dollar would each occupy 36% of the global "foreign exchange + gold" reserves.

Deutsche Bank's analysis specifically emphasizes that its research focuses on gold's share in "foreign exchange plus gold" reserves, rather than its share in central banks' total assets. The report considers this to be a more relevant analytic dimension since "foreign exchange plus gold" reserves are foreign currency-denominated assets that central banks can use to defend their own currencies.

Central banks' preference for gold has not weakened due to rising prices, but has instead become stronger. Deutsche Bank, citing a World Gold Council survey conducted between February 25 and May 20 this year, said that the proportion of central banks planning to increase their gold reserves has risen from 29% last year to 43%.

More importantly, market managers are highly consistent in their assessment of this overall trend. The survey found that as many as 95% of reserve managers interviewed expect global central banks' total gold holdings to increase over the next 12 months, much higher than last year's 81%.

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The above highlights are from Zhuifeng Trading Desk.

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