A quiet revolution in the composition of the world’s official reserves has placed gold ahead of US Treasuries for the first time since 1996. The European Central Bank’s June 3 report pegged the yellow metal’s share of global central bank reserves at 27 percent, against 22 percent for US government bonds. The euro held steady at 15 percent.

ECB President Christine Lagarde attributed the shift partly to geopolitical tensions, but the central bank itself injected a dose of caution. Much of gold’s rise stems from valuation effects as prices surged in previous years. At end-2023 prices, Treasuries would still dominate with 26 percent, leaving gold at a lower share. The EZB’s caveat underscores that the headline number is as much a price story as a volume story.

Behind the statistics, central banks are voting with their feet. After a modest net sale in March, the World Gold Council reported that April saw a return to net purchases of 17 tonnes. Poland led the pack with 14 tonnes, pushing its gold holdings to nearly one-third of total foreign reserves. The People’s Bank of China added 8 tonnes, extending its 18-month buying streak. Russia, by contrast, trimmed its stock. Over the first quarter as a whole, central banks accumulated 244 tonnes net — the fastest pace in more than a year. Crucially, buying persists even at elevated price levels, signalling a strategic reallocation rather than tactical timing.

Private demand tells a complementary story — but with a geographic tilt. Bar and coin investment surged 42 percent year-on-year to 474 tonnes in the first quarter, even as jewelry fabrication slumped by roughly a quarter. Asia provided the engine: Chinese investors snapped up 207 tonnes of physical gold, the highest quarterly total since 2013, while Indian purchases climbed more than a third to 62 tonnes. Asian gold ETFs also attracted inflows, contrasting with outflows from North American funds. The gravitational centre of the gold market has shifted decisively eastward.

Should investors sell immediately? Or is it worth buying Gold?

None of this means gold has escaped short-term headwinds. On Wednesday the metal slumped to its lowest in over two months as a stronger US dollar and rising inflation fears — fuelled by fresh US-Iran tensions that lifted oil prices — weighed on sentiment. ADP reported 122,000 new private-sector jobs in May, beating expectations and reinforcing the Federal Reserve’s case for caution on rate cuts. Higher interest rates and a firm dollar are a double blow for non-yielding bullion.

Gold staged a modest recovery in Asian trading on Thursday after Washington announced a ceasefire agreement between Israel and Lebanon, easing some geopolitical risk premium. Yet the price still sits at around $4,466 an ounce, roughly 20 percent below January’s record high and below its 50-day moving average — signs of cooling near-term momentum.

The next major catalyst arrives on Friday with the US non-farm payrolls report. Strong numbers would reinforce rate concerns and pressure gold further; weaker data could offer relief. Beneath the day-to-day noise, the structural picture remains clear: central banks and Asian investors are providing two sturdy pillars of demand, even as the metal’s reserve ascendance carries an asterisk from the ECB’s own valuation adjustment.

Ad

Gold Stock: Buy or Sell?! New Gold Analysis from June 4 delivers the answer:

The latest Gold figures speak for themselves: Urgent action needed for Gold investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from June 4.

Gold: Buy or sell? Read more here...