Deutsche Bank links changes in central bank reserves to shifting geopolitics, with a move towards gold and away from the US dollar. It sets out a framework that ties gold’s reserve share to central bank gold holdings, the gold price, and the level of global foreign exchange (FX) reserves.
The article contrasts the rise of a US-led global order after 1989 with today’s more divided environment. It states that gold’s declining role in reserves followed the 1990s geopolitical shift, rather than the end of Bretton Woods in the 1970s.
Gold Reserves And Geopolitics
It reports that the US dollar’s share of central bank reserves has dropped from over 60% to 40%. Over the same period, gold’s share is said to have risen to 30% after tripling from its low point.
The framework identifies three drivers: how much gold central banks hold, the price of gold, and total global FX reserves. It attributes current movement in all three areas mainly to emerging market central banks, including gold purchases and the possibility of FX reserves starting to decline.
Geopolitical shifts are reshaping the global financial order, pushing central banks to prefer gold over the US dollar. This move is not driven by monetary policy but by a reaction to the changing balance of world power. We are seeing a structural trend where countries are actively reducing their reliance on the dollar.
This trend is backed by recent data from the World Gold Council, which reported that central banks added a robust 290 tonnes to global reserves in the first quarter of 2026. This strong start to the year follows the near-record buying we witnessed throughout 2025, where over 1,000 tonnes were purchased. The sustained demand from emerging market banks provides a strong floor for the gold price.
Trading Implications For Gold
Simultaneously, the dollar’s dominance in foreign exchange reserves continues to wane. The latest IMF data from the end of 2025 showed the dollar’s share of allocated reserves had fallen to 58.2%, a level not seen in decades. Ongoing trade friction and sanctions have only encouraged nations to seek alternatives.
For traders, this points to continued upward pressure on gold, which has already climbed to over $2,450 an ounce this year. One strategy is to use call options or bull call spreads on gold ETFs to capitalize on further gains while limiting risk. The persistent central bank buying acts as a significant tailwind that is unlikely to reverse quickly.
The underlying geopolitical tension suggests volatility will remain elevated, making options pricier but also potentially more valuable. Traders should also consider strategies that benefit from a weakening dollar, such as put options on the U.S. Dollar Index (DXY). This provides a way to trade the other side of the de-dollarization trend.
We must pay close attention to the actions of emerging market central banks, as they are the primary drivers of this movement. Their continued purchases are putting upward pressure on gold prices. It is also crucial to watch if their foreign exchange reserves begin to decline, as this would signal a major shift in global capital flows.
