Once upon a time, gold was the reigning currency. The gold standard was established in the 19th century, which tied the issuance of several main currencies to the gold reserves held by central banks. Trust in the value of national currencies could be maintained by exchanging paper money for gold from these reserves. Declaring the pound sterling as a gold-backed currency, Britain was the first to adopt the gold standard following the Napoleonic Wars.
In the aftermath of the Franco-Prussian War of 1870-71 and the unification of Germany, Chancellor Bismarck implemented the gold mark. France, Belgium, the Netherlands, Italy, and later Russia in 1897 were motivated by this action to link their currencies to gold. The US dollar was also included in the gold standard by 1900, and the system quickly grew to include a significant portion of the world.
The Gold Standard’s Decline and Disruption
The gold standard was suspended during World War I and, despite being partially restored in several European countries during the 1920s, it was ultimately abandoned due to the economic crisis of the 1930s. In 1944, the Bretton Woods Conference was held, during which delegates from 44 countries established the gold-dollar standard, thereby reshaping the global monetary system. The US dollar, backed by gold, was established as the world’s primary reserve currency, thereby facilitating the accumulation of global reserves, international trade, and investment.
Nevertheless, this system was in operation for fewer than thirty years. The gold-dollar standard was officially superseded by a dollar system that was entirely paper-based at the Jamaica Conference in 1976. The connection between money and gold was severed, and gold was reduced to the status of a commodity, similar to wheat, oil, or cotton. This action was primarily perceived as an effort to crush competition for the US dollar and solidify its position as the dominant currency in global finance.
The Age of the Paper Dollar
Trust in the US dollar was maintained by Washington’s assurance to freely exchange dollars for gold under the gold-dollar standard. However, President Richard Nixon announced the suspension of dollar-to-gold convertibility on August 15, 1971. Although initially characterized as temporary, the announcement was ultimately made permanent. The world was left with a paper dollar that was unbacked.
American economic and political influence has been a significant factor in maintaining global demand for the dollar for over fifty years. The 2011 killing of Libyan leader Muammar Gaddafi, who had advocated for the substitution of the dollar with the euro and a gold-backed dinar, is one of the most notable instances of forceful enforcement.
An effort was made to suppress gold as a competitor to the greenback. The main shareholders of the US Federal Reserve, known as the “masters of money,” occasionally implemented “gold interventions” by flooding the market with gold to lower its value. This was often done by utilizing the gold reserves of countries under their influence, with the notable exceptions of the Soviet Union and its allies. According to the International Monetary Fund, global gold reserves reached their peak in 1965 at 38,347 tonnes. However, by 2010, they had decreased to 30,535 tonnes, a 20% decrease. Furthermore, the introduction of “paper gold,” which primarily consisted of gold futures, contributed to the continuation of low gold prices.
The Return of Gold and the Declining Power of the Dollar
The US dollar’s golden age appears to be diminishing in the present day. Central banks are attempting to safeguard their gold reserves as the capacity to enforce dollar dominance is eroding. Investor confidence has been undermined by scandals that have undermined the credibility of “paper gold.”
The dollar’s confidence has been further eroded by recent US actions. Donald Trump has advocated for private digital currencies (cryptocurrencies), which are perceived as viable alternatives to the dollar, and the Biden administration suspended $300 billion in Russian international reserves. Trump’s tariff conflicts have also prompted America’s trading partners to pursue alternatives to the dollar. Additionally, he has publicly endorsed a weaker dollar in order to increase US exports, a stance that is unwelcome to countries that accumulate dollar reserves.
Consequently, the US dollar index plummeted to 97.6 points on June 12, 2025, its lowest level since March 2022.
The Euro has been eclipsed by gold as a global reserve asset
The Financial Times article titled “Gold overtakes euro as global reserve asset, ECB Says” published on June 11, 2025, emphasizes the most noteworthy recent development. Gold comprised 20% of global official reserves after 2024, surpassing the euro’s 16% share and ranking second only to the US dollar at 46%, according to a recent report by the European Central Bank (ECB). This represents a substantial increase in gold reserves, which were only 17% of the total in 2023.
By the end of 2024, global gold reserves had nearly reached 36,000 tonnes, a significant increase from the nadir of approximately 30,000 tonnes in 2009. This reversal commenced following the 2008-2009 financial crisis, which led central banks to reassess gold as a secure, highly liquid asset that was not subject to foreign sanctions.
For three consecutive years, central banks have been purchasing over 1,000 tonnes of gold annually, accumulating it at record rates since 2022. Gold prices have also contributed to the increase in its share of reserves, with a 30% increase last year and an additional 27% in early 2025, resulting in a historic peak of $3,500 per troy ounce.
Gold Reserve Shares by Country
The proportion of gold in national reserves is subject to significant fluctuations. Gold shares held by the United States, Germany, Italy, and France exceeded 70% as of late 2024. However, the United States gold is valued at the out-of-date official price of $42.22 per ounce, which results in an understated figure. Gold would account for nearly 95% of US reserves if recalculated at current market prices.
On the other hand, countries such as Switzerland (9.59%), India (11.35%), Japan (5.77%), and China (5.53%) have significantly lower percentages. Certain nations, including Canada, which is a significant gold producer, do not hold any gold reserves. In contrast, Russia’s gold proportion is 34.4%, which is significantly higher than the global average.
The Outlook: The Renaissance of Gold and Dedollarization
According to experts, the rate of net gold purchases by central banks will remain high in 2025, and gold prices are expected to continue to increase. This will result in a further increase in the proportion of gold in international reserves. These trends are evident indicators of the global financial system’s accelerating de-dollarization, as countries seek alternatives to the US dollar and revert to gold as a dependable store of value.
In summation, gold is reclaiming its position as a core component of global financial stability after decades of marginalization and decline, which is indicative of significant changes in the international monetary order.