As global central banks diversify their exposure to U.S. assets, the rising allocation to gold raises questions about the sensitivity of their reserves to gold prices and the consequent policy ramifications. While central banks are collectively on track to buy 1,000 metric tons for a fourth year in a row, we find that for most emerging markets, surging gold prices—not increased physical holdings—have been the main driver of rising gold reserves.1 Against this backdrop, we also observe that in the event of a sudden, sharp decline in gold prices, EM central bank reserve coverage and liquidity should still offer sufficient buffers against external risks.

Central bank reserve statistics point to growing gold allocations in recent quarters as the institutions have accumulated over 1,000t of gold in each of the last three years, up from the 400-500t average over the preceding decade.2 According to both market narratives and surveys, gold reserves are expected to increase over the next 12 months as central banks indicate a desire to allocate more to gold given growing concerns over trade, geopolitical risks, and the role of the U.S. dollar in the global financial system. This would increase their exposure to price drops if contextual factors (e.g., trade concerns) dissipate.

However, our analysis pours some cold water on the idea of a central bank gold rush. For most emerging market central banks that we analyzed, growth in reported gold holdings between 2022 and 2024 was predominantly the result of price increases as opposed to new purchases.

For context, Figure 1 illustrates the change in foreign assets, including gold, for 40 emerging market counties between 2022-2024 and the resulting liquidity ratio.³

Figure 1

Foreign Assets and Liquidity Ratios (%)

Central banks usually hold gold as an inflation hedge or for diversification reasons. Uncertainty about the global trade framework and sanctions have also grown more salient for some central banks. Statistics on gold holdings are not readily available for some countries. However, anecdotal evidence suggests that the Russian and Chinese central banks have been the most intense buyers as they sought to diversify away from dollar assets for both economic and geopolitical reasons. For other EMs, aside from idiosyncratic issues, geopolitical factors might play a smaller role, and they might prefer more liquid assets (Figure 2).

Figure 2

Changes in Foreign Assets (%) 

Quantity versus Price Effects

To distinguish between the valuation effect and the change in physical bullion holdings, we first carried out a statistical analysis of the increase in gold reserves from end-2022 to end-2024. Figure 3 shows the respective contributions of changes in gold quantity and price to percentage changes in the value of gold holdings.

Figure 3 

Gold Holdings Split Between Quantity and Price Effects (%)

We then extended our stress analysis to import coverage, i.e. to the number of months of imports covered by a central bank’s foreign assets. This ratio is usually calculated using liquid FX reserves; hence, our ratios are higher than in, say, IMF reports (since foreign assets are higher than its subset, FX reserves; Figure 5). 

Figure 5

Import Coverage Ratio During Negative Gold Shock

The key finding of this stylized exercise is that even under a more severe, negative gold price scenario, many central banks with the largest absolute declines in liquidity still maintain comfortable ratios on a relative basis. However, we must caveat our results as this calculation assumes central banks can sell their gold in a crisis and the value of other reserve assets does not decline meaningfully. EM central banks could resort to accumulating additional reserves through the usual means, including, but not limited to, absorbing FX inflows related to trade and investments or absorbing proceeds of FX issuance or emergency financing.

¹ Reuters, “Central Banks on Track for 4th year of Massive Gold Purchases, Metals Focus Says,” June 5, 2025.

² World Gold Council, “Central Bank Gold Reserves Survey 2025,” June 15, 2025. 

³We define liquidity ratio as the ratio between a central bank’s foreign assets and short-term external debt redemptions plus the financing needed to cover the current account deficit.