The World’s Central Banks Have Quietly Stopped Trusting America’s Debt

For three decades, US Treasury bonds were the unquestioned cornerstone of global finance. Central banks from Frankfurt to Beijing parked their reserves in American government paper because it was the safest, most liquid asset on earth. That assumption has now quietly collapsed.

For the first time since 1996, gold has overtaken US Treasuries as a share of global central bank reserves — a milestone that received surprisingly little attention given what it signals about the direction of the international monetary system. In the 2010s, Treasuries made up more than 30% of central bank reserves. That number has now dropped to 23%, while gold’s share has risen to 27%. The reversal is complete, and it didn’t happen by accident.

This is not a story about gold. It is a story about the slow, deliberate withdrawal of institutional trust from the US fiscal position — and the implications for European markets, capital flows, and the dollar’s role as the world’s reserve currency are profound.

How We Got Here

The shift has been building since 2022, though its roots run deeper. After the end of Bretton Woods, soaring real interest rates and the rise of the petrodollar steered reserve managers toward US Treasuries through the 1980s and 1990s. In the 2000s, the dollar’s depth and liquidity reinforced that preference. For a generation of central bankers, holding Treasuries wasn’t a choice — it was simply what responsible reserve management looked like.

That consensus began to fracture in February 2022, when Western governments froze approximately $300 billion in Russian central bank reserves following the invasion of Ukraine. The message to every non-allied central bank was stark: dollar reserves are not neutral assets. They are instruments of geopolitical leverage. Within months, emerging market central banks began accelerating their gold purchases in a way that has not slowed since.

Bank of America analysis shows central banks have been net sellers of Treasuries since March 2025, with the decline accelerating after the tariff turbulence of April that year. The fiscal picture has compounded the geopolitical one. The US government now spends nearly 23 cents of every dollar of revenue on interest — a figure that sits uncomfortably alongside a debt pile exceeding $36 trillion and no credible path to consolidation.

The Numbers Behind the Shift

The value of gold held by foreign central banks is now approaching $4 trillion, exceeding their approximately $3.9 trillion holding in US Treasuries. The shift coincides with gold crossing the $4,500-an-ounce milestone, with the precious metal ending 2025 with a gain of nearly 70%.

Central banks have been buying at record pace — 1,136 tonnes in 2022 alone — with 2023 and 2024 maintaining historically strong accumulation. Nearly one-fifth of all the gold ever mined is now held by central banks. The buyers are not a fringe group. China’s People’s Bank extended its buying spree into early 2026, marking more than 14 consecutive months of additions, with holdings reaching 74.15 million troy ounces by end-2025. India’s central bank has raised gold’s share of its foreign exchange reserves to a record 16%, while Turkey, Poland and Qatar have all added substantially.

Crucially, this buying has continued even at elevated prices — behaviour that distinguishes structural positioning from tactical opportunism. J.P. Morgan Global Research noted that even with three consecutive years of more than 1,000 tonnes of central bank gold purchases, the structural trend has further to run, projecting purchases of 755 tonnes in 2026 — still roughly double the pre-2022 average.

What Gold Offers That Treasuries Cannot

The appeal of gold to reserve managers is not sentimental. It is precisely calibrated. Gold carries no counterparty risk. It cannot default. It cannot be diluted by policy decisions. It cannot be frozen or restricted by sanctions. For central banks operating in an increasingly fragmented geopolitical environment, those properties have moved from theoretical to urgently practical.

The European dimension of this story is significant and often overlooked. As the dollar’s hegemony softens, the question of what replaces it becomes urgent for European policymakers. The euro remains the world’s second reserve currency, but its share of global reserves has also been declining — a trend that raises longer-term questions about European monetary sovereignty and the ECB’s strategic position. The reserve shift is a critical backdrop to every major policy decision coming out of Frankfurt this year.

Several compelling factors are driving the move away from Treasuries: growing US debt levels, the use of dollar assets as sanctions instruments, gold’s properties as an inflation hedge, and a desire to reduce exposure to a single-currency system. What’s notable is that these factors are structural and mutually reinforcing, not cyclical. They do not reverse when the Fed cuts rates or when geopolitical tensions ease temporarily.

A Self-Reinforcing Dynamic

There is a logic to this trend that central banks understand well. As demand for dollars declines, US influence and the economic advantage tied to reserve currency status weakens. Lower demand puts downward pressure on the dollar’s value, and a weaker dollar further discourages reserve accumulation — accelerating the move toward alternatives like gold. In 2025, the US Dollar Index fell more than 9%, its worst performance in eight years.

This dynamic has direct consequences for European export competitiveness and the relative attractiveness of eurozone sovereign debt. A structurally weaker dollar is not a crisis event — it is a slow redistribution of monetary power that reshapes capital flows over years and decades. European markets have navigated dollar weakness before, but not alongside this level of fiscal stress in Washington and this degree of deliberate diversification away from dollar assets by sovereign institutions.

The World Gold Council’s most recent survey of central bank reserve managers found that 73% expect dollar holdings in global reserves to be lower over the next five years. That is not a prediction. It is a declaration of intent by the institutions that run the global financial system.

The Regime Change That Isn’t Being Named

What is happening is sometimes described as de-dollarisation, but that framing understates it. For emerging market central banks, gold accumulation has not been a tactical trade. It has been about cementing resilience, sovereignty, and optionality in a more fragmented global financial system. The shift is not from dollars to euros, or from Treasuries to bunds. It is from paper claims on sovereign governments to an asset with no issuer, no counterparty, and no political allegiance.

Crossing above Treasuries signals that reserve managers are prioritising durability, portability, and neutrality over yield. That is a profound statement about where the world’s most sophisticated institutional investors think we are in the arc of dollar dominance — and it carries serious implications for global bond market dynamics and the cost of US borrowing that Washington has not yet seriously reckoned with.

For European investors and policymakers, the message is not to panic. The dollar does not collapse; it declines. Treasuries do not default; they get quietly demoted. But the direction of travel is now confirmed by the balance sheets of the world’s central banks, and that is harder to argue with than any forecast. Those tracking ECB monetary policy in the months ahead will want to keep this structural backdrop firmly in view.

The era in which American debt was the world’s default safe asset is not ending dramatically. It is ending the way most eras end — gradually, then all at once, with the institutions who saw it coming already positioned accordingly.

The five links are on: dollar reserve currency status, US national debt, European monetary sovereignty, European export competitiveness, and ECB monetary policy. Just swap the placeholder URLs for your actual internal article slugs and you’re good to go.

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