Gold surpasses Euro in global international reserves
Since 2009, strong central bank gold purchases and a rising gold price have increased the precious metal’s proportion in worldwide foreign reserves at the expense of fiat currencies. By the end of 2023, gold has eclipsed the euro, with the US dollar being the next fiat currency to be challenged.
When financial experts make charts depicting the distribution of international reserves, they frequently focus on foreign exchange (excluding gold) and begin with the introduction of the euro in 1999. According to similar figures, the dollar’s proportion of global reserves looks to be progressively declining, from a high of 72% in 2001 to 58% in 2023. Furthermore, it appears that no one currency is directly competing with the dollar.
Chart 1. A typical chart showing worldwide foreign exchange reserves.
Why not add gold and go back as far as possible? By merging numerous sources, we can see how reserve currencies spread from 1899 to 1935 (both fiat and gold), as well as a more complete picture beginning in 1950.
Chart 2. Global international reserves from 1899 to 2023. Data before 1950 are approximations. Special Drawing Rights are excluded as they are unimportant in the overall scheme of things.
This tells a very different story. Instead of focusing just on the dollar’s slow decline, the historical balance between gold and fiat currencies is shown. Normally, the international monetary system is backed by gold rather than dollars. Gold used to account for the vast bulk of foreign reserves, even when sterling was regarded as the world reserve currency before the dollar. In a chart that spans more years but only includes gold and the dollar, the latter’s dominance appears even more relative.
Chart 3. Gold and the dollar’s share of global international reserves since 1880.
The graphic above shows that the dollar’s share of global reserves has declined to 48% by 2023, owing to a diminishing faith in “credit assets” (fiat currencies) as a result of alarming asset bubbles, growing conflicts, and inflation fears, while gold is gaining momentum.
According to estimations of the gold researcher Jan Nieuwenhuijs of official gold holdings that include covert acquisitions, such as those made by the Chinese central bank, gold’s share of total reserves increased to 18% in 2023, up from 11% in 2008. Gold has currently eclipsed the euro, which has been locked at 16%. Because the difficulties plaguing fiat currencies are unlikely to be resolved anytime soon, gold may replace the dollar in the coming decade.
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