Central Banks Grow Wary of US, Turn to Gold

Central banks around the world now plan to trim their dollar holdings more than they plan to grow them, marking the first time in the history of a major annual survey that intentions to cut have outpaced intentions to add, a shift that traces back largely to worries about American political risk.

At a Glance

• 74 central banks surveyed between March and May by OMFIF, a London based research group
• First year since 2023 that plans to reduce dollar allocations outweigh plans to increase them
• US dollar share of global reserves fell to a two decade low last year, per JPMorgan
• Interest in the euro and Chinese renminbi is climbing as an alternative
• Dollar still makes up roughly 58% of central bank reserves, largely unchanged over five years

Why Central Banks Are Rethinking the Dollar

The survey comes at an unsettled moment for American foreign policy. A war in the Middle East, one that the United States helped set in motion, has rattled energy markets, and President Trump has been experimenting with new ways to impose tariffs. Both developments have added to a sense that Washington's approach to the world is harder to predict than it used to be.

OMFIF, which has been tracking central bank investment intentions since 2023, released its latest findings this week. The report states plainly that geopolitical concerns have now eclipsed domestic US politics as the main factor pushing reserve managers away from the dollar. As the group put it, the perceived US role in stoking geopolitical tension is now the bigger deterrent.

A Gradual Retreat, Not a Rush for the Exit

None of this means central banks are abandoning the dollar. OMFIF's own language makes that clear: the currency still dominates reserve portfolios and is expected to keep doing so for a long while yet. Andrea Correa, the group's head of research, told reporters that the dollar's share of central bank allocations has hovered around 58% for the past five years, a remarkably steady number even as sentiment shifts underneath it.

What is changing is the direction of new money. Rather than a dramatic sell off, this looks more like a slow reallocation, with reserve managers spreading their bets across a wider set of currencies instead of concentrating so heavily in dollars.

The Euro and Renminbi Gain Ground

Two currencies stand out as beneficiaries of this shift. Almost every central bank in the survey said the Chinese renminbi offers useful diversification for their reserves. The euro's appeal has grown too: two thirds of respondents called it more attractive for global trade, up sharply from 43% just a year earlier.

Longer term intentions tell a similar story. Twenty nine percent of central banks said they want to increase euro holdings over time, compared with 22% who said so last year. Karsten Stroborn, who directs markets at Germany's central bank, noted in the report that euro denominated international debt hit record levels in 2025, and the euro has become the top currency used in green bonds.

Smaller currencies are picking up interest as well. The Singapore dollar, the South Korean won, and the South African rand were all mentioned as currencies drawing fresh attention from reserve managers looking to diversify beyond the traditional dollar and euro pairing.

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