Gold Becomes Top Safe-Haven Asset for Central Banks Amid Global Uncertainty

Central banks around the world are increasingly turning to gold as a strategic safeguard against mounting geopolitical risks, according to a new survey by the Official Monetary and Financial Institutions Forum (OMFIF). The findings indicate growing demand for gold reserves, a gradual diversification away from the US dollar, and wider adoption of artificial intelligence to strengthen policy and operational decision-making.

Geopolitical tensions drive stronger demand for gold

Heightened geopolitical uncertainty is prompting central banks globally to increase their exposure to gold, which is increasingly being viewed as a strategic reserve asset rather than merely a financial investment.

According to OMFIF's public investor survey, a net 30 per cent of central banks intend to raise their gold allocations over the next one to two years. The survey also found that 82 per cent of central banks held physical gold in 2026, up from 71 per cent a year earlier.

Expectations for gold prices remain bullish. Around 61 per cent of central banks surveyed believe gold prices will settle between USD 5,000 and USD 6,000 per ounce by June 2027. However, 28 per cent of respondents said current price levels are high enough to discourage additional purchases.

"The motivation behind gold purchases is increasingly strategic rather than purely financial. Protection against geopolitical risk is cited by 51% of respondents, up 11% from 2024," according to the report.

Central banks look beyond the US dollar

The survey highlights a growing trend among reserve managers to reduce their dependence on the US dollar over the coming decade, particularly in emerging market economies.

The euro and China's renminbi have emerged as the leading alternatives for reserve diversification, while some emerging market currencies are also attracting interest.

"This year, 29% of respondents plan to increase euro holdings in the long term, up from 22% last year," the survey report stated.

Despite the growing interest, the report noted that both currencies face structural limitations.

"Neither the euro nor the renminbi fully solves reserve managers' problem: the former lacks a single, deep safe asset market, while the latter remains constrained by market structure and geopolitical concerns," the report said.

AI adoption rises as volatility becomes the new reality

The survey also pointed to the increasing use of artificial intelligence by central banks seeking to improve efficiency, analysis and decision-making processes.

"89% of developed economy central banks report some form of artificial intelligence implementation, compared with 44% of emerging market peers," the report mentioned.

OMFIF said policymakers are increasingly adapting to a world characterised by persistent uncertainty and market volatility rather than expecting a return to more stable conditions.

"The old assumption that public investors can wait for the environment to normalise looks increasingly unrealistic," the report said.

(With inputs from ANI)