In a landmark shift for the global financial order, gold has dethroned US Treasury securities to become the largest reserve asset held by foreign governments. This historic change, driven by a year of explosive price gains and relentless buying by central banks worldwide, signals a profound loss of confidence in traditional fiat currencies and a move towards the perceived safety of the precious metal.
The Numbers Behind the Shift
According to the latest data from the World Gold Council, sourced from the International Monetary Fund (IMF), official foreign holdings of gold exceeded 900 million troy ounces by the end of November 2025. When valued at the price on November 30, this stockpile was worth a staggering $3.82 trillion. This figure is now neck and neck with the almost $3.88 trillion worth of US Treasury bonds (both long and short-term) held by foreign governments as of October.
However, using year-end prices and assuming central banks maintained their stocks, analysts estimate that foreign central banks concluded 2025 holding approximately $3.93 trillion in gold reserves. This calculation definitively pushes gold ahead of Treasury holdings, marking a pivotal moment. "Nobody trusts anyone's fiat currency, hence the rise in the appeal of gold and other metals," noted Joe Kalish, chief macro strategist at Ned Davis Research (NDR).
Drivers of the Golden Rally
The primary engine behind this seismic shift was the 66% surge in gold prices throughout 2025. This explosive appreciation, coupled with record purchases by central banks seeking to diversify away from the US dollar, rapidly closed the gap. "When I first started talking about this 3 months ago, the difference was pretty stark," Kalish wrote to Barron's. "Today, not so much based on estimates and current pricing."
The move represents a deliberate reduction in exposure to the US financial system. Motivations include concerns over the dollar's declining value and the growing geopolitical risk that assets could be frozen or sanctioned, particularly under policies of the Donald Trump administration. Gold's role as a safe-haven asset was vividly illustrated this week. Following the US seizure of Venezuela's president, the front-month gold futures contract on the Comex jumped 2.8% on Monday and another 1% on Tuesday.
Future Outlook and Wall Street Divergence
While such geopolitical events provide a reason to hold gold, they may not always trigger immediate buying frenzies. "Such events are a reason to own gold but not necessarily a reason to buy gold today," cautioned Michael Bradshaw, head of precious metals at global investment firm Allspring, suggesting the recent boost could be short-lived.
The long-term trajectory for gold hinges on several key factors:
- US Monetary Policy: Lower interest rates and higher inflation typically boost gold's attractiveness.
- US Dollar Strength: A weaker dollar makes gold cheaper for holders of other currencies.
- Central Bank Demand: Whether the aggressive buying trend from institutions continues.
Wall Street is divided on the outlook. Major firms like UBS have turned bullish, reinstating an "overweight" call on gold. Conversely, Capital Economics predicts a decline in gold prices for 2026. The firm argues that the "latest break-neck rally in prices has been driven largely by western retail investment demand, which could dissipate quickly," especially if the US Federal Reserve cuts interest rates less aggressively than the market currently expects.
This historic pivot from paper debt to physical gold underscores a deepening search for stability in an uncertain world, reshaping the foundations of international reserves.
