Gold as international reserves: A barbarous relic no more?

After falling for decades, central bank gold holdings have risen since the Global Financial Crisis. We identify 14 “active diversifiers,” countries that purchased gold and raised its share in total reserves by 5 or more percentage points over the last two decades. In contrast to the diversification of foreign currency reserves, which has been undertaken by advanced and developing country central banks alike, diversifiers into gold are exclusively emerging markets. We document two sets of factors contributing to this trend. First, gold is seen as a safe haven in periods of economic, financial and geopolitical volatility. Second, financial sanctions by the US, UK, EU and Japan, the main reserve-issuing economies, are associated with an increase in the share of central bank reserves held in the form of gold.