Gold Overtakes Euro as the Second-Largest Central Bank Reserve

• Gold surpasses Euro to become the second-largest reserve asset for global central banks, now comprising 16% of total reserve assets. The yellow metal outperforms Bitcoin as well. 
• As the Israel-Iran conflict escalates, gold prices have surged to $2,650, drawing investors seeking security, while Bitcoin’s value has fallen by over $4,000 since October 1.

Amid the global macro uncertainty, central banks are hogging gold like never before, with the yellow metal overtaking Euro recently to become the world’s second-largest central bank reserve asset. As we know, central banks across the world have been on a solid gold-buying spree in the last two years, which has pushed their contribution to 16 percent of the total reserve assets.

At the same time, the share of USD as a global reserve asset has dropped to 58 percent. The gold purchase has particularly surged among central banks in the East as they are willing to replace fiat currencies, including the USD, with gold amid economic uncertainties and rising geopolitical tensions.

Gold Vs. USD

Central banks around the world accumulated a net total of 483 tons of gold in the first half of this year, marking a 5 percent increase over the previous record of 460 tons set in H1 2023, with strong purchasing activity continuing into Q3. In 2023, central banks bought 1,037 tons of gold, falling just 45 tons short of the multi-decade record set in 2022.

However, in the last 24 years, the share of USD as global reserves has dropped by 14 percent since the beginning of the century. Analyst Dave Kranzler cautions that the recent adjustments in monetary policy may exert additional downward pressure on the dollar. He added:

The Fed has painted itself into a corner. It’s under enormous pressure from the market and Wall Street to cut interest rates. But if it does that, it risks a rapid sell-off in the dollar. A falling dollar and lower interest rates will make it even more difficult to attract foreign interest in funding additional Treasury debt – something which has already become problematic.

With the weakening of the USD, gold prices have continued to hit fresh highs this year, according to CNF.

Bitcoin and Gold Give Opposite Moves With Rising Israel-Iran Conflict

With the escalation of the Israel-Iran conflict this week, commodities including gold, and crude oil surged while Bitcoin moved in the opposite direction, per the CNF report. This has once again sparked discussions on whether BTC is really a safe-haven asset in such market uncertainties.

Gold is currently trading at $2,650 levels, moving all the way to $2,665 levels earlier this week on October 1. i Xing, financial markets strategist consultant to Exness said:

The escalating conflict in the Middle East has prompted investors to seek security in gold, bolstering its appeal amidst broader market uncertainty.

On the other hand, the Bitcoin price has faced strong rejection at $65,000 levels and has dropped by more than $4,000 since October 1 to currently trade at $60,500.

Jeroen Blokland, founder of the Blokland Smart Multi-Asset Fund, noted that investors are selling BTC to invest in gold, while Adam Cochran humorously referred to it as a “safe haven.”

Additionally, precious metals analyst Jesse Colombo shared with his 169,000 followers on X that Bitcoin and cryptocurrencies tend to decline during times of geopolitical uncertainty, unlike precious metals. Colombo added:

That confirms my long-held belief that crypto is not a safe haven. It’s yet another risk asset just like high-flying tech stocks.