Gold’s rally is off the charts. Prices have doubled over the past two years and now top $4,000 an ounce. Detachment from the dollar-centric financial system could be one reason for the gain.
Since the end of June, gold has become a bigger part of the combined foreign currency and gold reserves held by countries, estimated Deutsche Bank’s research analyst Michael Hsueh. Its share went up to 30% from 24% as the price of gold has increased. At the same time, the dollar share of these reserves dropped to 40% from 43%, he calculated in a note on Friday.
As prices of gold increases, its natural to see gold commanding a larger part of reserves; gold has gained 61% in 2025. Yet what’s striking is how close it’s coming to matching dollar in that reserve mix.
“In order to equalize its share versus the USD, the gold price would need to rise to USD 5,790/oz assuming no change in the quantity of gold holdings,” Hsueh wrote. “This would imply both gold and the USD representing 36% each of global reserve holdings of FX+gold.”
What’s leading to lower holdings of dollar is a matter of speculation: The dollar could be seen as overvalued; the U.S. freezing Russian assets may have sent a chilling message to other countries about their holdings; trade disputes with China and other countries could be shifting the reliance on dollar. To some, these claims are unconvincing given how entrenched dollar is within the financial world. Nearly every commodity is priced and traded in dollars.
Still, a new world order has been under way, says Joseph Kalish, chief global macro strategist at Ned Davis Research. A “disengagement by nonaligned countries and a lack of trust in fiat currencies is driving gold’s role as a new monetary anchor and increasing investors’ appetite for gold and other precious metals,” he wrote in a note on Thursday.
More gains could be ahead. The firm’s ‘Daily Gold Sentiment Composite’ index, which gauges the psychology surrounding gold, is at 75%, “so there could be more room for it to rally before becoming extreme,” Kalish wrote.
Investors could also pile into gold as policy uncertainty ratchets up with President Donald Trump flipping his stance on tariffs and China trade more often than any recent administration at the White House. Meanwhile inflation can give gold an edge.
To be sure, leading economists aren’t predicting a recession this year, and fears of a global war have eased after the fragile truce between Israel and Palestine. Both factors are negative for gold and further raise the question of whether investors in gold anticipate a major market turmoil that stock investors are overlooking.
