Global Reserve Shift: How Gold Is Outperforming US Treasury Bonds

SYNOPSIS

Central banks globally are converting out of US Treasuries into gold reserves. For the first time in decades, gold reserves have surpassed Treasuries, restructuring world finance. This blog investigates why the shift is occurring and what it implies for reserve currencies in the future.

Shift in Global Reserves: Exploring Gold's Dominance Over US Treasury Bonds in Investment Trends

As per the World Gold Council (WGC) Q2 2025 report, global demand for Gold surged to a record high of US$132BN, which is 45 % y/y. Central banks were a chief pillar of global demand, and they added 166t to world official gold reserves. While the buying pace eased, the health of the central bank demand remains good.

jewellery demand tones and value continued to differ y/y tonnage declines were universal, but gold jewellery expenditures recorded across-the-board gains.

Why Gold is Winning Against US Treasury Bonds?

Central banks, for the first time since the 1990s, now possess more gold than US government securities called Treasuries.

Each nation has a treasury box for security, in which they put various items, primarily US dollars, some euros, some state bonds, and a small amount of gold. Lately, they have been stocking the chest with more gold than US bonds.

The European Central Bank's International Role of the Euro 2025 report states that the central banks collectively own approximately 36,000 tons of gold. At current prices, that hoard is worth more than 3.6 trillion dollars, greater than they have in US Treasuries (some 3.8 trillion dollars, as the US Treasury's June 2024 survey finds).

Since gold has breached the 3,500 dollars an ounce mark in 2025, its market value has surpassed Treasuries held in official reserves.

Why are they looking towards Gold?

1.    Debt Worries: The US continues to borrow more. Central Banks do not bank all their reserves on the borrowings of America.

2.    Diversification: Central Banks do not wish to bank purely on dollars; they wish to include euros and gold as well.

3.    Inflation Hedge: Gold acts as a hedge against inflation and currency devaluation.

4.    Gold is safe and cannot be blocked, and holds value during uncertainty. The US dollar is still the most powerful currency, but gold has now climbed to second place in the Global Reserves hierarchy.

Data Snapshots:

A.    Gold Reserves data snapshot for Q2 2025 as per World Gold Council:

Sr. No.	Country	Economic Grouping	Foreign Reserves	Total Reserves	Gold Reserves Tones	Gold Reserves Millions	Holdings (%)
1	India	Lower Middle Income	618,280.00	711,289.31	879.98	93,009.31	13.08
2	China	Upper Middle Class	3,384,637.82	3,627,580.37	2,298.53	242,942.5	6.70
3	United States of America	High Income	244,638.09	1,104,302.73	8,133.46	859,664.65	77.85
4	United Kingdom	High Income	165,213.6	198,009.3	310.3	32,795.7	16.56

B.    The WGC’s Gold Demand Trends reports show:-

Sr No.	Year	Tones
1	2024	1045
2	2023	1037
3	2022	1082

Conclusion:

The Global Reserves landscape is going through a historic shift as Gold Reserves overtakes US Treasuries in Central Bank Holdings. Influenced by debt concerns, diversification, and perception towards Gold as a safe haven asset, this trend signals a rebalancing of global finance, by gold creating a space as a second pillar of reserve security after the US dollar.

Manav Trivedi