Has Gold’s Aura Grown Too Big for the Dollar to Ignore?

• It’s been a big year for gold, not just in terms of price, but in how policymakers are thinking about it. With reserves going up and headlines focusing on record levels, gold has now taken second place as a global reserve asset, behind the US dollar and just ahead of the euro. On the surface, it looks straightforward. But the reasons behind it are more layered. Central banks seem to be thinking differently now about what counts as safe, reliable, and useful.

• This isn’t about gold taking over from the dollar. It’s more about a slow change in how people build their reserve portfolios, especially when politics gets messy, institutions start to look shaky, and usual policy rules stop working like they used to. And this isn’t just happening in emerging markets, developed countries are reevaluating things too.

A Change in Behaviour, Not Just in Price

• At Cordoba, we’ve been keeping a close eye on what central banks are holding in their reserves. The data is pretty clear, gold now makes up nearly 20% of reserves by value, which is double what it was ten years ago. That rise isn’t just because of price. A lot of it comes from new buying, especially by emerging markets that are more exposed to things like sanctions or funding stress. Even central banks that stepped back from gold in the past are coming back in, though they’re being a bit more careful this time.

• There are two big things we’re focused on. First, the politics. The war in Ukraine, US sanctions, and the way dollar reserves have been used as a tool of policy have brought up questions that most people didn’t pay much attention to in the past. Things like whether the dollar system is still neutral, or even fully reliable, in a world where alliances are constantly evolving. That’s pushed some governments, not just China, but also places in the Gulf and parts of Asia, to add more gold, and to take alternatives like the euro or renminbi more seriously.

• The second part is about the economics. The post-Bretton Woods setup wasn’t just built on trust in the dollar, it was about size, depth, and being able to move money easily. The dollar still ticks those boxes better than anything else. But the edge isn’t what it used to be. Gold, for all its flaws, is now seen by some as a simpler way to hedge against messy politics or unpredictable policy. That doesn’t mean it’s perfect, supply can still respond quickly when prices rise, and central banks have pulled back a bit lately. The World Gold Council says official buying dropped by a third last quarter, and even China is getting more selective.

• But behaviour has changed. The dollar hasn’t lost its seat at the table, but the aura it once had, that aura of exorbitant privilege backed by unmatched liquidity and universal trust, is starting to fade. It still leads, but there’s a growing sense that others are catching up. Let’s just say the dollar’s exclusivity deal is up for renegotiation. Reserve managers aren’t walking out, but they’re quietly leaning toward the exit, adding gold to the mix. This isn’t just about sanctions or geopolitics, it’s the slow drip of doubt in a system that feels more transactional, less anchored, and harder to hedge around.

What This Means for Positioning

• This topic is far from new. From Triffin’s Dilemma to Eichengreen’s work on reserve transitions, we know these things take time. Trust in reserve currencies is sticky. But what’s different now is the sheer number of overlapping forces, US fiscal instability, geopolitical fragmentation, and liquidity asymmetries, that are accelerating the search for alternatives.

• In our view, this calls for nuance. We’re not betting against the dollar. But we are seeing gold as something more than just a crisis hedge. In our portfolios, we’re comfortable with strategic gold exposure, not just for geopolitical protection, but as a structural expression of how reserve preferences are shifting. So be wary of getting too caught up in the day-to-day, to be better positioned for the long run, we need to understand these systemic shifts before they fully take shape.

• That said, we’ll be keeping a close eye on a few things: how sticky gold demand proves once policy normalises; whether the euro or renminbi can meaningfully capture market share without deep capital market reform; and how central banks respond to shocks, through rate hikes, reserve rebalancing, or currency diversification.

• What’s clear is this: the dollar’s not about to lose its place overnight. But its dominance is definitely being questioned, not because of the news cycle, but because the data, the flows, and the sentiment are all pointing in a different direction. And that shift is only just beginning. If you’ve been following our notes, you’ll know where this is going. If not, now’s a good time to catch up.