De-Dollarization? Diversification? Exploring Central Bank Gold Purchases and the Dollar’s Role in International Reserves

Abstract

I examine how governments have managed their holdings of gold and dollar reserves in recent decades, a period when gold’s share of aggregate international reserves rose and the dollar’s share fell. Using data on central banks’ reserve currency composition and official sector purchases of U.S. assets, I argue that gold reserve accumulation is generally not associated with de-dollarization of international reserves at the country level, except in a few prominent cases. Instead, gold purchases are more consistent with most countries pursuing a modest diversification of international reserves that does not solely target a reduced dollar share. My evidence suggests that this characterization also applies to gold reserve accumulation in 2022 and 2023. Finally, I show that, while gold’s importance as a store of value for the official sector has grown since 2000, its use as a unit of account and a medium of exchange remains limited.