The Return of History: Deutsche Bank Discusses Gold, the Dollar, and the Future of Money

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Gold is reclaiming its previously lost status.

Deutsche Bank’s latest research report this week points out that the conditions that cemented the dollar’s reserve status in the 1990s—unipolar hegemony, expansion of free trade, economic stability, and low inflation—have quietly reversed.

The share of the dollar in global central bank reserves has plummeted from a peak of over 60% to 40%, while gold's share has nearly doubled in the past four years, rising to close to 30%. The gap between the two has narrowed to just 10 percentage points.

Deutsche Bank believes that the portion lost by the dollar has not shifted to other fiat currencies, but almost entirely to gold. Since the 2008 financial crisis, emerging market central banks have cumulatively bought over 225 million troy ounces of gold, surpassing the total quantity sold by developed economies in the 1990s.

In simulated calculations, Deutsche Bank suggests that if emerging market central banks raise their gold target share to 40%, even if their foreign exchange reserves shrink to $5 trillion in the next five years, the gold price could still rise to $8,000 per ounce.

The more far-reaching impact is that the physical gold accumulated by emerging markets may be a prelude to a future currency order independent of the dollar system.

Return of History: Dollar Yielding to Gold

Deutsche Bank defines the current situation as "the return of history," referring to the reversal of the "end of history" declared by historian Francis Fukuyama in 1989.

At that time, the U.S. established its undeniable global dominance, trade globalization expanded rapidly, developed economy central banks competed to sell gold, and emerging markets accumulated large amounts of dollar-denominated foreign exchange reserves.

Deutsche Bank points out that the decline of gold’s share in global central bank reserves did not occur with the 1971 collapse of the Bretton Woods system, but originated from the full establishment of U.S. hegemony after the fall of the Berlin Wall in the 1990s.

At that time, U.S. inflation was under control, fiscal surplus, mature independent central bank system, U.S. government bonds were both liquid and offered positive yields, making them highly attractive compared to zero-yield and storage cost-laden gold.

European central banks—including Switzerland, Britain, Belgium, the Netherlands, Austria, etc.—sold gold in succession and reached the Central Bank Gold Agreement in 1999 to coordinate reductions.

Meanwhile, emerging market foreign exchange reserves grew about ninefold from 1990 to 2007, most of which were held in dollars, greatly diluting gold’s relative share.

Now, this logic is running in reverse. The report identifies three core driving factors:

Active gold accumulation by emerging market central banks;Central bank gold buying pushes up gold prices, creating positive feedback;And the structural decline in emerging markets’ foreign exchange reserves may be starting.

The confluence of these three forces means the upside space for gold remains considerable.

Emerging Markets: Main Buyers and Reserve Structure Reshapers

Emerging markets are the absolute core of the current global gold reserve restructuring.

Data shows that by the end of 2025, emerging market central banks will hold 367 million troy ounces of physical gold, whereas developed economy central banks will hold 712 million troy ounces. The former is about 52% of the latter, compared to only about 20% before the 2008 financial crisis.

Looking at gold’s share of total reserves, the gap is even greater. By the end of 2025, developed economy central banks’ gold will account for 34% of their total reserves, whereas emerging market central banks’ share will be only 16%. The report says this gap means emerging markets still have vast room for accumulation.

Notably, the regional distribution and acceleration of gold purchasing.

While nearly half of emerging market central banks’ gold holdings are concentrated in China, Russia, and India, mid-sized powers like Turkey, Kazakhstan, and Saudi Arabia are also important holders.

Of special note are Eastern Europe and the Middle East/North Africa regions: since the Russia-Ukraine conflict, over half of the gold reserves of the Czech Republic and Poland were bought in the past four years; Qatar, Egypt, and UAE have also acquired 25% to 50% of their total gold holdings in recent years.

Deutsche Bank's research also reveals a geopolitical pattern. Emerging markets more closely aligned with Western defense systems have lower gold reserve shares, while those more aligned with China/Russia defense have clearly higher gold shares.

Analysis based on SIPRI arms import data shows that emerging market countries importing more than one-third of their arms from the "Eastern bloc" (China/Russia) have twice the gold share in their reserves than those with low defense ties.

The report infers that, if more countries diversify away from U.S. defense dependence, it logically corresponds to a decrease in dollar reserves and an increase in gold reserves.

Geopolitics Reshape Reserve Logic: The Impact of Dollar Weaponization

Deutsche Bank considers the freezing of about $300 billion of Russia’s foreign reserves by Western countries in 2022 a watershed moment that accelerated global central banks’ reassessment of dollar reserve risks.

Physical gold can be stored domestically, not affected by sanctions or asset freezes, making this a core consideration for emerging market central banks. Both Russia and China keep all their gold reserves within their own borders.

On a broader macro scale, the "Great Moderation" era has ended. U.S. inflation has exceeded targets for the past five years, monetary policy independence is in question, and fiscal paths cause market concerns.

The report also notes the U.S. is withdrawing from free trade and traditional alliances. The past logic was: the U.S. was happy to outsource manufacturing to emerging markets, and emerging markets liked to outsource security and savings to the U.S.

This pattern is reversing. Asian and Gulf countries increasingly value strategic autonomy in energy and defense, possibly needing to use accumulated dollar reserves to build their own capacities.

The report cites reports that UAE has requested dollar swap arrangements with the U.S. Treasury, showing a demand for dollar liquidity emerging, and Gulf countries’ savings may be mobilized for postwar reconstruction and domestic defense building.

Gold Price Scenario Simulation: May Hit $8,000 in Five Years

Deutsche Bank assumes that for every 1 million troy ounces of gold purchased by emerging market central banks, the gold price will rise about 1%.

Based on this, the report calculates gold price trajectories under different scenarios.

In the baseline scenario, if emerging market reserves remain at the current $8 trillion level and central banks set a gold share target at 40%, gold prices will far exceed the current level.

Even if emerging market reserves shrink to $5 trillion,if central banks simultaneously pursue gold purchasing to lift gold to 40% share, gold prices could still rise to about $8,000 per ounce.

The logic: With $5 trillion in reserves, gold would need to reach about $3.3 trillion in market value to achieve the 40% target.

At the current pace of about 10 million troy ounces annual central bank purchases (per IMF data), an additional 52 million ounces would be needed to push gold to about $7,977, matching the five-year buying pace.

The only extreme scenario for price decline is if emerging market reserves shrink drastically to $2.5 trillion.

At that point, the gold holdings (about $1.7 trillion) at current prices would already approach the 40% share target, leaving almost no motivation to purchase more and erasing upward price space.

Additionally, the report notes that official gold buying tracked by the World Gold Council—including sovereign wealth funds—is about 3,000 tons annually, three times IMF's central bank data.

This means actual official gold buying may greatly exceed commonly cited figures, and potential upward pressure on prices is likewise amplified.

Gold and the Future Currency Order: Possibility Beyond the Dollar

Deutsche Bank further analyzes whether the accumulation of physical gold by emerging markets signals the brewing of an alternative currency order independent of the dollar system.

The report points out that historically, fiat money and asset-backed currency alternated not by accident—cycles in financial order are the norm. At the founding of Bretton Woods, the U.S. attributed credibility to the dollar by holding over 70% of global gold reserves.

The report argues that if other countries seek to elevate their currencies’ international status, turning to gold backing equally follows internal logic.

Gold has a currency history of over 2,500 years. It is not any country’s liability; its annual above-ground inventory growth is about 2%, less than most countries’ fiscal deficit expansion, which gives it unique anchoring value in environments with questionable fiscal discipline.

According to independent think tank OMFIF’s research, the BRICS countries are exploring the creation of a joint currency partly pegged to gold and partly to member currencies.

According to media reports by end-2025, a "BRICS Unit" backed by 40% physical gold and 60% BRICS fiat currency equivalents is in pilot phase.

The report emphasizes this "unit" has yet to become official BRICS policy and currently exists mostly at a conceptual stage.

The report cites a symbolic data point in conclusion: By 2025, the total value of global above-ground gold stocks will, for the first time in 40 years, exceed the total U.S. marketable Treasury supply.

In other words, gold as an asset class has surpassed the volume of the world's most important safe asset.

History has returned.

Risk Disclaimer and Exclusion ClauseThe market involves risk and investment must be cautious. This article does not constitute personal investment advice and does not consider the specific investment goals, financial situation or needs of individual users. Users should consider whether any opinions, views or conclusions in this article fit their particular circumstances. Investing at your own risk. ```