Is the Surge in Global Gold Reserve Shares Induced by U.S. Monetary Policy?

Abstract

Based on quarterly data from 105 countries between 2000 and 2023, this paper examines the impact of U.S. monetary policy on countries' gold reserve shares. The results show that U.S. accommodative monetary policy, which increases dollar liquidity and reduces interest rates, typically leads central banks to increase their gold reserve shares. The impact of U.S. monetary policy varies across countries depending on their economic development levels, foreign reserve shares, and capital account openness. However, after the COVID-19 pandemic, central banks increasingly valued gold as a supranational asset, and the rapid tightening of U.S. monetary policy further prompted them to increase gold reserves. Geopolitical risks positively moderate the impact of U.S. monetary policy on gold reserve shares, and rising geopolitical tensions are becoming a key driver for gold accumulation. To counter the influence of U.S. monetary policy, China should adopt diversified reserve asset management strategies, strengthen gold reserve management, and continue advancing RMB internationalization.

Keywords: U.S. monetary policy, reserve assets, gold, geopolitical risks