Gold Near $5,000 as Central Banks Rebalance Global Reserves

Source: Coindoo Original Title: Gold Near $5,000 as Central Banks Rebalance Global Reserves Original Link:

Gold briefly surged to $4,999 per ounce yesterday, stopping just short of the $5,000 milestone before easing slightly to around $4,990 at the time of writing.

The move comes amid growing focus on long-term reserve trends rather than short-term speculative flows, with central bank behavior increasingly shaping the outlook for the precious metal.

Key Takeaways

• Gold hit $4,999 yesterday and is holding near $4,990, driven by structural rather than speculative demand
• Gold still represents only about 25% of global FX reserves, far below historical peaks of 60–70%
• The U.S. dollar’s share of reserves is declining, reinforcing long-term diversification into gold

While prices are already near record territory, gold’s role in the global financial system suggests the rally may still be in its early stages. Gold currently makes up roughly 25% of global foreign exchange reserves – a level that remains far below historical norms.

Central Banks Still Far From Historical Gold Allocations

Historically, gold played a much larger role in reserve portfolios. During the 1970s and 1980s, central banks held an estimated 60–70% of their reserves in gold. By contrast, the modern reserve system has been dominated by fiat currencies, particularly the U.S. dollar.

The dollar’s share of global reserves rose from about 20% in the 1970s to a peak near 60% in the early 2000s. Since then, that dominance has gradually eroded. Recent data show the dollar’s share continuing to decline, while gold’s share is slowly but consistently increasing, signaling a long-term rebalancing rather than a temporary shift.

A Potential 50-Year Mean Reversion in the Making

Analysts increasingly frame the current environment as a rare, multi-decade mean reversion. Central banks are diversifying reserves amid concerns over currency debasement, geopolitical risk, and the long-term stability of dollar-centric systems. De-dollarization efforts, diversification strategies, and a push to reduce financial and political exposure are all reinforcing gold’s appeal as a neutral reserve asset.

If central banks move even partway back toward historical gold allocations, reserve-driven demand could remain a powerful tailwind for prices. Under this view, gold trading near $5,000 may not signal excess, but rather an early phase of a longer structural move.

Silver Seen as the Next Catch-Up Trade

As gold consolidates near record highs, attention is gradually shifting toward silver. In past precious metals bull markets, silver often lagged initially before accelerating sharply later in the cycle, earning its reputation as “gold on steroids.” With gold leading and reserve dynamics strengthening the broader metals complex, some market participants now see a potential path for silver to challenge $100 over the longer term.