Central banks plan gold buying amid dollar risk

XAU/USD is trading at 4005.5, down 0.22 percent on the day, as gold consolidates near record territory while a fresh central bank survey reinforces the structural case for bullion demand: reserve managers are now more inclined to trim dollar holdings than to add to them for the first time in years.

At a Glance

• XAU/USD trades at 4005.5, off 0.22 percent on the session
• OMFIF survey of 74 central banks finds more plan to cut dollar allocations than raise them, a first since 2023
• Dollar share of global FX reserves fell to a two decade low last year, according to JPMorgan data
• Central banks show rising appetite for the euro and renminbi as diversification assets
• Gold's safe haven bid persists alongside geopolitical risk tied to Middle East tensions and tariff policy

Why Gold Is Pausing After Its Run

A 0.22 percent pullback at 4005.5 looks modest against the backdrop of what has been a historic advance for gold this year. The metal's proximity to the 4000 handle matters for market psychology: round number levels tend to attract profit taking after extended rallies, and the current dip reads as consolidation rather than a reversal of trend. With no fresh economic data cited in the underlying survey window, the move is best understood as digestion of prior gains rather than a reaction to a specific catalyst.

The more consequential story sits beneath the daily tape. The Official Monetary and Financial Institutions Forum, a London based research group, published findings this week showing that for the first time since it began tracking central bank investment intentions in 2023, more reserve managers say they plan to reduce dollar holdings over the next decade than plan to increase them. The survey drew responses from 74 central banks between March and May.

Reserve Managers Turn Cautious on the Dollar

The shift in sentiment did not emerge from a single event. OMFIF's report points to a Middle East conflict that drew in US involvement and disrupted global energy markets, layered on top of President Trump's continued use of tariffs as a policy tool. Both dynamics have sharpened perceptions of unpredictability in US foreign policy, and that perception is now showing up directly in reserve allocation intentions.