The Great Reserve Shift: Central Banks Drop USD for Gold

Now that the immediate war premium has faded, gold is stepping out of the shadow of geopolitical headlines. The market is returning to its core drivers; ones less visible, but far more structural.

But that leaves a question hanging:

If gold is a hedge against war, why didn’t it hit new highs at the height of the conflict? And now that “peace,” as Trump calls it, is here, should we expect it to keep falling?

The answer lies in the evolution of what gold actually hedges. 

Despite the recent retreat, gold is having its best year since 1979

Despite the latest pullback, gold is still up +28.5% year-to-date, outperforming nearly every major asset class outside tech and crypto.

You’d have to go back to 1979 - when gold surged over 120% - to find a stronger year.

The Central Banks

A record 95% of central banks expect gold to take a larger share of global reserves in the next 12 months.

73% expect USD reserves to shrink over the next five years.

A routine diversification or a strategic realignment in the architecture of trust, risk, and monetary power.

The Fund Managers

Bank of America’s latest survey shows global investors are now more underweight the US dollar than at any point since 2005.

ETF inflows have been rising for eight straight sessions, while futures positioning shows growing demand for gold, fuelled by concerns over monetary instability and a coming Fed pivot.

The Retail Flow

Gold is undergoing its largest correction since May, but speculative long positions are rising.

Technical Setup: Key Support Holding Near $3,300

The upward trend has been maintained with higher lows - a bullish structure still intact despite recent weakness. Gold is currently testing $3,300, the lower edge of its year-long uptrend and the 50-day EMA.

Key levels to watch:

• Support: $3300 (ascending trendline + EMA50)
• Resistance: $3360 (MA20 + price reactions) and $3450 (multi-week high: the more it's tested, the more significant a breakout could become)
• We need a sustained break below $3300 would threaten the current bullish formation.

RSI and momentum indicators will be critical - signs of bearish divergence or a breakdown in volume would warrant caution.

From central banks to retail flows, and from a weakening dollar to resilient technicals the signals are aligned: gold is no longer just a hedge; it’s positioning itself as a preferred reserve asset.

And this move? It’s far from over.