Deutsche Bank believes that the unipolar structure, free trade, and low inflation conditions that have driven the dominance of the US dollar as a reserve currency have reversed. The share of the US dollar in global central bank reserves has fallen from over 60% to 40%, while the share of gold has nearly doubled to 30% in the past four years. If emerging markets increase their target allocation for gold to 40%, gold prices could rise to $8,000 within five years. Gold may signal the emergence of a new monetary order independent of the dollar system.
$XAU/USD (XAUUSD.CFD)$ In reclaiming the status it once lost.
A recent research report from Deutsche Bank this week pointed out that the conditions which drove the establishment of the US dollar’s reserve status in the 1990s—unipolar hegemony, the expansion of free trade, economic stability, and low inflation—have quietly reversed.
The share of the US dollar in global central bank reserves has plummeted from a peak of over 60% to 40%, while the share of gold has nearly doubled in the past four years, rising to nearly 30%. The gap between the two has narrowed to just 10 percentage points.
Deutsche Bank believes that the share lost by the US dollar has not shifted to other fiat currencies but has almost entirely flowed into gold. Since the 2008 financial crisis, emerging market central banks have cumulatively purchased more than 225 million troy ounces of gold, surpassing the total amount sold by developed economies in the 1990s.
In its simulation calculations, Deutsche Bank believes that if emerging market central banks raise their target share of gold to 40%, even if foreign exchange reserves contract to 5 trillion US dollars over the next five years, gold prices could still rise to 8,000 US dollars per ounce.
The deeper implication is that the accumulation of physical gold by emerging markets may foreshadow a future monetary order independent of the US dollar system.
The return of history: the US dollar yielding to gold.
Deutsche Bank defines the current situation as ‘the return of history,’ implying that the so-called ‘end of history’ proclaimed by historian Francis Fukuyama in 1989 is being reversed.
At that time, the United States established its indisputable position as the global hegemon, globalization expanded rapidly, developed economy central banks competed to sell gold, and emerging markets accumulated large amounts of foreign exchange reserves denominated in US dollars.
Deutsche Bank noted that the decline in the proportion of gold in global central bank reserves did not occur with the collapse of the Bretton Woods system in 1971 but stemmed from the comprehensive establishment of US hegemony after the fall of the Berlin Wall in the 1990s.
At that time, with inflation under control, fiscal surpluses, and a mature independent central bank system, U.S. Treasury bonds offered both liquidity and positive returns, making them highly attractive compared to gold, which yielded zero interest and incurred storage costs.
Several European central banks, including those of Switzerland, the United Kingdom, Belgium, the Netherlands, and Austria, successively sold off gold reserves and reached the Central Bank Gold Agreement in 1999 to coordinate reductions.
Meanwhile, emerging market foreign exchange reserves grew approximately ninefold between 1990 and 2007, with the vast majority held in U.S. dollars, significantly diluting the relative proportion of gold.
Today, this logic is reversing. The report identifies three core driving factors:
Emerging market central banks are actively increasing their gold holdings;
Central bank gold purchases are driving up prices, creating a positive feedback loop;
And the scale of emerging market foreign exchange reserves may begin to structurally decline.
The convergence of these three forces suggests that gold still has significant upside potential.
Emerging Markets: Key Drivers of Gold Purchases and Reserve Restructuring
Emerging markets are the absolute core of the current global restructuring of gold reserves.
Data shows that by the end of 2025, central banks in emerging markets held 367 million troy ounces of physical gold, compared to 712 million troy ounces held by central banks in developed economies. The former accounts for approximately 52% of the latter, whereas this ratio was about 20% before the 2008 financial crisis.
The gap becomes even more pronounced when considering the proportion of gold in total reserves. By the end of 2025, gold constituted 34% of total reserves for central banks in developed economies, but only 16% for those in emerging markets. The report suggests that this disparity indicates significant room for further accumulation by emerging markets.
Notably, the regional distribution and accelerating trend of gold purchases warrant attention.
Although nearly half of the gold holdings of central banks in emerging markets are concentrated in China, Russia, and India, middle powers such as Turkey, Kazakhstan, and Saudi Arabia are also significant holders.
Eastern Europe and the Middle East and North Africa (MENA) regions deserve particular attention: since the Russia-Ukraine conflict, over half of the gold reserves of the Czech Republic and Poland were acquired within the past four years; countries like Qatar, Egypt, and the United Arab Emirates in the MENA region have also obtained 25% to 50% of their total gold holdings in recent years.
Research by Deutsche Bank also reveals a geopolitical pattern. Emerging market countries with closer ties to Western defense systems tend to have lower proportions of gold reserves, while nations with stronger defense ties to China and Russia exhibit significantly higher gold ratios.
An analysis based on SIPRI arms import data indicates that emerging market countries importing more than one-third of their arms from the ‘Eastern bloc’ (China and Russia) hold twice the proportion of gold in their reserves compared to countries with weaker defense ties.
Based on this, the report concludes that if more countries diversify their reliance on U.S. defense, it logically follows that dollar reserves will decline and gold reserves will rise.
Geopolitical Reconfiguration of Reserve Logic: The Impact of Dollar Weaponization
Deutsche Bank considers the freezing of approximately $300 billion in Russian foreign exchange reserves by Western countries in 2022 as a watershed moment that accelerated global central banks’ reassessment of the risks associated with dollar reserves.
Physical gold can be stored domestically, unaffected by sanctions or asset freezes, a feature that has become a core consideration for central banks in emerging markets. Both Russia and China keep their entire gold reserves within their own borders.
From a broader perspective, the era of the “Great Moderation” has ended. U.S. inflation has persistently exceeded targets over the past five years, raising questions about the independence of monetary policy and causing market concerns over fiscal trajectories.
The report also notes that the United States is stepping back from free trade and its traditional alliance system. The previous logic was: the U.S. was content to outsource manufacturing to emerging markets, while emerging markets were willing to outsource security and savings to the U.S.
This dynamic is reversing. Countries in Asia and the Gulf region are increasingly prioritizing strategic autonomy in energy and defense, potentially requiring the use of previously accumulated dollar reserves to build their own capabilities.
The report cites reports indicating that the UAE has applied to the U.S. Treasury for a currency swap arrangement, signaling an emerging demand for dollar liquidity, while Gulf nations’ savings may be mobilized for post-war reconstruction and domestic defense initiatives.
Gold Price Scenario Analysis: Could Reach $8,000 Within Five Years
Deutsche Bank assumes that for every 1 million troy ounces of gold purchased by central banks in emerging markets, the price of gold will increase by approximately 1%.
Based on this, the report provides estimates of gold price movements under different scenarios.
In the baseline scenario, if emerging market foreign exchange reserves remain at the current level of around $8 trillion and central banks set a target of 40% allocation to gold, the price of gold will rise significantly above current levels.
Even if emerging market foreign exchange reserves contract to $5 trillion, should central banks simultaneously increase gold purchases to achieve a 40% allocation, the price of gold could reach approximately $8,000 per ounce.
The specific logic is as follows: to achieve a 40% share target, the market value of gold needs to reach approximately $3.3 trillion under a $5 trillion foreign exchange reserve scale.
At the current pace of central banks purchasing about 10 million troy ounces annually (based on IMF data), an additional purchase of approximately 52 million ounces would push the gold price to around $7,977, corresponding to a five-year buying schedule.
The only extreme scenario leading to a price decline assumes that emerging market foreign exchange reserves shrink significantly to $2.5 trillion.
At that point, the existing gold holdings of emerging market central banks (approximately $1.7 trillion at current prices) would already be close to the 40% share target, leaving almost no additional motivation for gold purchases and eliminating upward price potential.
Furthermore, the report specifically highlights that official gold purchase data tracked by the World Gold Council, including sovereign wealth funds, shows an annual average purchase volume of over 3,000 tons—three times the figure cited in IMF central bank data.
This implies that the actual level of official gold purchases may far exceed the commonly cited figures, correspondingly amplifying the potential upward pressure on gold prices.
Gold and the Future Monetary Order: Possibilities Beyond the US Dollar
Deutsche Bank further analyzed whether the accumulation of physical gold by emerging markets signals the brewing of an alternative monetary order independent of the US dollar system.
The report notes that the historical alternation between fiat currencies and asset-backed currencies is not coincidental; the cyclical nature of financial orders is inherently normal. At the inception of the Bretton Woods system, the United States backed the dollar with its gold reserves, which accounted for over 70% of the global total.
The report argues that if other countries seek to enhance the international status of their own currencies, transitioning to a gold-backed system also holds intrinsic logic.
Gold has a monetary history of over 2,500 years and is not a liability of any single country. Its annual growth rate of above-ground stock is approximately 2%, lower than the expansion rate of fiscal deficits in most countries, which gives it a unique anchoring value in environments where fiscal discipline is questioned.
According to research by the independent think tank OMFIF, the BRICS countries are exploring the creation of a common currency that would be partially backed by gold and partially linked to the currencies of member states.
According to media reports at the end of 2025, a “BRICS Unit” backed by a combination of 40% physical gold and 60% equivalent BRICS national currencies has entered the pilot stage.
The report emphasized that this “unit” has not yet become an official policy of the BRICS countries and remains largely at the conceptual exploration stage.
The report concluded by citing a highly symbolic data point: In 2025, the total value of the global above-ground gold stock exceeded the total size of U.S. tradable Treasury securities for the first time in 40 years.
In other words, gold, as an asset class, has surpassed the volume of the world’s primary safe-haven assets.
History has returned.
Editor/joryn
