Central Banks Signal a Gradual Dollar Trim as Gold Becomes Strategic Reserve Insurance, OMFIF Survey Finds
Global reserve managers are not abandoning the US dollar, but they are increasingly questioning how much additional dollar exposure they want to hold over the next decade. That is the key message from OMFIF’s Global Public Investor 2026 survey, which shows that, for the first time since the series began recording long-term intentions in 2023, more central banks plan to reduce dollar holdings than increase them.
The shift is important because it relates to marginal allocation decisions, not the existing stock of reserves. The dollar remains the dominant reserve currency because no other market matches the depth, liquidity and safety of US dollar assets. But if the next dollar of reserve accumulation is less likely to go into the dollar than before, the long-term direction of official flows begins to change.
OMFIF’s survey covers 90 central banks, sovereign funds and public pension funds managing more than US$10 trillion in assets. That implies an average institutional footprint above US$111 billion if assets were evenly distributed, although the actual sample is heavily skewed toward very large official investors. The scale matters: even small portfolio reallocations by this investor base can influence demand for currencies, sovereign debt, gold and alternative reserve assets.
The dollar finding should therefore be read as a controlled diversification signal rather than a de-dollarisation shock. Reserve managers are still constrained by the same practical problem: alternatives to the dollar are useful but incomplete. The euro has liquidity and institutional depth, but it lacks a single, permanent safe asset comparable to US Treasuries. The renminbi offers diversification and exposure to China, but remains limited by market access, capital-account restrictions and geopolitical concerns.
That backdrop makes the euro numbers significant. OMFIF found that 29 percent of respondents plan to increase euro holdings over the long term, up from 22 percent last year. That is a 7 percentage point increase, or a relative rise of almost 32 percent in the share of institutions looking to add euro exposure, suggesting the euro’s reserve role is constrained less by demand than by the supply of deep, common, highly liquid safe assets.
Gold is the clearer beneficiary of the current environment. The share of central banks holding physical gold rose to 82 percent in 2026 from 71 percent a year earlier, an 11 percentage point increase that is equivalent to a relative rise of about 15.5 percent. In reserve-management terms this is a meaningful shift, because gold generates no income, carries storage costs and can be volatile. Central banks are still adding it because its strategic value has increased.
The forward-looking gold numbers reinforce that point. A net 30 percent of respondents plan to increase their gold allocation over the next one to two years, while 61 percent expect gold to settle between US$5,000 and US$6,000 an ounce by June 2027. The midpoint of that expected range is US$5,500 an ounce, and the US$1,000 width shows reserve managers see gold remaining structurally elevated rather than merely reacting to a short-term spike.
Price sensitivity is present but not dominant. Only 28 percent of respondents say the current gold price is discouraging further purchases, so the share expecting gold in the US$5,000 to US$6,000 range is more than twice the share deterred by current prices. The message is that many official investors are treating gold less as a tactical trade and more as reserve insurance.
The motivation confirms the shift. OMFIF said 51 percent of respondents cite protection against geopolitical risk as a reason for holding gold, up 11 percentage points from 2024. That implies a 2024 level of around 40 percent, so the geopolitical-risk motive has increased by roughly 27.5 percent in relative terms. Gold is being used not only as a hedge against inflation or currency weakness, but also as protection against sanctions risk, regional tensions, policy uncertainty and broader fragmentation in the global financial system.
The survey’s broader risk backdrop is also important. Reserve managers identify regional tensions, uncertainty over the direction of US policy and energy security as leading concerns, while capital preservation remains the top investment objective. This combination explains why diversification is gradual: official investors want more resilience but cannot compromise liquidity or safety, so the result is a more diversified reserve portfolio at the margin rather than a wholesale exit from the dollar. Technology is becoming a more serious part of the conversation too, with central banks weighing how to integrate artificial intelligence to improve analysis and decision-making, even as it raises new questions around governance, model risk and cyber resilience.
Why it matters: The Gulf has direct exposure to this theme. Dollar pegs mean regional central banks are structurally anchored to the dollar for monetary stability, liquidity management and confidence in the exchange-rate framework, which limits how aggressively official reserves can diversify. Sovereign wealth funds, however, have more flexibility to diversify across currencies, regions, sectors and real assets. The practical implication is that Gulf reserve books are likely to stay dollar-heavy, while sovereign portfolios can keep broadening exposure to gold, euro assets, Asian assets and alternative strategies. The survey also supports treating gold as a strategic allocation rather than only a market trade, since continued official-sector demand can help underpin prices.
Outlook: The dollar’s reserve role remains dominant, but the direction of intent has changed. The most likely path is not a rapid decline in dollar reserves, but a slow reduction in incremental dollar allocation as central banks add more gold, test greater euro exposure and selectively consider other currencies. The speed of that shift will depend on US policy credibility, interest-rate expectations, regional tensions, energy-security risks and whether Europe can build a deeper common safe-asset market. For now the dollar keeps its core role, but gold is gaining strategic weight and reserve management is becoming more multipolar at the margin.
Sources: Official Monetary and Financial Institutions Forum (OMFIF); Bloomberg.
