Gold Surpasses the Euro to Rise as a Global Reserve Asset Amid Geopolitical Turmoil

The world witnessed a significant shift in the global reserve asset landscape by the end of 2024,
as gold overtook the euro to become the second-largest asset held in central banks’ reserves.
This move was driven by rising prices and increasing strategic demand amid growing global risks.

Contents

Gold
Oil

Gold

Demand-Driven Rise and Policy Shifts

According to the European Central Bank (ECB), gold accounted for approximately 20% of global foreign reserves by the end of 2024,
compared to 16% for the euro based on market prices.
Meanwhile, the U.S. dollar maintained its lead, although its share dropped to 46%.
This strategic shift was primarily fueled by unprecedented purchases from central banks,
with annual average purchases exceeding 1,000 tonnes over the past three years—double the pace seen before 2022.

This buying momentum came as a direct response to geopolitical developments,
particularly the freezing of Russian reserves by Western countries following the invasion of Ukraine. Consequently,
many countries reduced their exposure to the Western financial system and sought value-preserving assets less vulnerable to sanctions.
The ECB noted that the historical negative correlation between gold prices and real yields collapsed in 2022,
as central banks prioritized hedging against geopolitical risks over high interest rates.

Geopolitical Tensions and Global Trade Push Prices Higher

Gold extended its gains, supported by heightened tensions in the Middle East and growing trade concerns between the United States and its partners.
Prices rose by 0.6%, nearing $3,373 per ounce, also benefiting from a weaker dollar.
These sharp moves followed aggressive remarks from U.S. President Donald Trump about reimposing tariffs and threats from Iran to strike American bases if nuclear talks failed.

In this volatile environment, gold emerged as the top safe haven for investors,
particularly after the U.S. ordered the evacuation of some embassy staff from Baghdad, Bahrain, and Kuwait.
Meanwhile, oil’s gains were pared despite an initial surge,
with Brent crude dropping to around $69 per barrel amid demand concerns linked to trade tensions.

Oil

Between Geopolitical Threats and Economic Volatility

Oil prices experienced sharp volatility amid escalating tensions in the Middle East.
Brent crude approached $69 per barrel after a daily spike of over 4%, marking its largest gain since last October.
West Texas Intermediate (WTI) also rose by 0.6% to $68.57 per barrel.

Despite the short-term rise, Brent has declined nearly 7% since the beginning of 2025
due to fears of slowing global demand amid a heated trade war between Washington and Beijing,
along with uncertainty surrounding U.S. tariff policies.
These fluctuations come at a time when the Middle East supplies about one-third of the world’s oil,
making any regional conflict instantly impactful on global markets.

Additionally, data showed a sharper-than-expected drop in U.S. crude inventories,
as refineries across the country operated at full capacity to meet summer demand,
reaching their highest processing levels since December 2019.

Conclusion

The shifting dynamics of global economics and politics are reshaping the priorities of central banks.
With rising tensions, gold is once again taking center stage as a strategic store of value,
at a time when the traditional global financial system appears to be losing some of its credibility.
In contrast, oil remains caught in a delicate balance between geopolitical threats and economic volatility,
making it a key variable in the global market equation in the months to come.

Gold Surpasses the Euro to Rise as a Global Reserve Asset Amid Geopolitical Turmoil

Gold Surpasses the Euro to Rise as a Global Reserve Asset

Related Topics