Why Central Banks Still Need Both Gold and Treasuries
M Radha Madhavi
The global reserve landscape is undergoing a subtle but significant transformation, according to a recent analysis by the research team at Invictus Finserv LLP.
The study points to the latest reserve data released by the European Central Bank (ECB), which shows gold accounting for nearly 27 percent of official global foreign exchange reserves at the end of 2025, overtaking U.S. Treasury holdings at approximately 22 percent and the euro at around 15 percent.
However, Invictus researchers caution against interpreting the numbers as evidence of the demise of the dollar-based financial system.
“The data does not suggest central banks have abandoned U.S. Treasuries,” the report notes. “Instead, it reflects a changing definition of safety in an increasingly fragmented geopolitical environment.”
According to Invictus, a significant portion of gold’s rise stems from valuation gains rather than large-scale reserve reallocations. Gold prices surged throughout 2024 and 2025, substantially increasing the market value of existing central-bank holdings. The ECB itself observed that if gold reserves were valued at end-2023 prices, U.S. Treasuries would still rank above gold as a reserve asset.
The report argues that gold becomes particularly valuable during periods when confidence in the global monetary order begins to weaken.
Unlike sovereign bonds, gold carries no issuer risk. A U.S. Treasury remains one of the world’s safest assets from a credit perspective, but it is still a liability of the U.S. government and operates within a financial ecosystem dependent on payment networks, custodians, sanctions regimes, and political relationships.
Gold, by contrast, exists outside those structures.
“Gold requires no payment rail, no swap line, and no foreign government’s promise to pay,” the Invictus analysis observes. “Its attractiveness rises when reserve managers become concerned about geopolitical fragmentation and the weaponization of finance.”
The research further highlights an often-overlooked aspect of reserve management: gold’s role as emergency collateral.
According to Invictus, central banks do not merely hold gold as a store of value. The metal can be sold, pledged or swapped to obtain liquidity when conventional funding channels become impaired. In situations where access to dollar liquidity is constrained or reserves face political risks, gold remains one of the few universally recognized assets that can be mobilized across jurisdictions.
The report stresses that gold’s growing importance should not be mistaken for a decline in the relevance of U.S. Treasuries.
In fact, Invictus argues that during periods of severe financial stress, demand for dollar assets is likely to remain exceptionally strong. Global trade, debt markets, and collateral systems remain heavily dependent on the U.S. dollar.
“When crises emerge, countries need liquidity, not theory,” the report states. “That reality continues to support demand for dollar cash, Treasury bills, and U.S. collateral.”
The analysis notes that while some investors may initially sell Treasuries during market turmoil to raise cash or meet margin requirements, the U.S. Federal Reserve’s ability to provide liquidity through swap lines, repo facilities, and other market-support mechanisms reinforces Treasuries’ position as the world’s primary crisis asset.
Invictus concludes that reserve managers are increasingly adopting a dual-protection strategy rather than choosing between gold and Treasuries.
Gold serves as protection against geopolitical uncertainty, sanctions risk, and declining trust in international institutions, while Treasuries remain indispensable for liquidity, collateral, and crisis management.
In the words of the report, “Gold is the asset central banks buy when they worry about trust. Treasuries are the asset they rely on when they need liquidity.”
That distinction, according to Invictus Finserv LLP’s research team, explains why central banks continue accumulating gold even as the dollar remains the foundation of the global financial system.
