Central Banks Eye Gold, Reduce Dollar Exposure as AI Adoption Accelerates: OMFIF Survey

Central banks are increasingly reassessing their reserve strategies, with more institutions planning to reduce U.S. dollar allocations over the next decade than increase them, according to a new survey released Tuesday by the Official Monetary and Financial Institutions Forum (OMFIF). The findings mark the first time OMFIF has recorded a net shift away from the dollar among global public investors, highlighting growing concerns over U.S. political uncertainty and geopolitical risks.

The survey gathered responses from 90 central banks, sovereign wealth funds, and public pension funds that collectively manage around $10 trillion in assets. While the U.S. dollar has gained roughly 3% this year, supported by higher U.S. interest rates, strong demand for American assets, and safe-haven buying during the U.S.-Iran conflict, many reserve managers believe the global monetary system is gradually evolving into a multipolar structure.

Nearly 79% of central banks and 60% of public funds expect the international financial system to become more diversified over time. Although there is no clear replacement for the dollar, reserve managers are expanding allocations to currencies beyond the traditional major reserve assets. The Norwegian krone, New Zealand dollar, and British pound have attracted growing interest, while central banks also continue to increase exposure to the euro and China's yuan despite structural challenges facing both currencies. Almost all respondents viewed the yuan as an effective portfolio diversification tool.

Gold has become one of the biggest beneficiaries of this shift. The survey found that 82% of central banks already hold gold reserves, with a net 30% planning to increase their gold holdings over the next one to two years. OMFIF said the precious metal has become a central component of reserve management strategies as institutions seek greater protection against economic and geopolitical uncertainty.

Artificial intelligence is also becoming a major priority for public investors. More than two-thirds of central banks expect to expand AI adoption in the near future, with none of the advanced economy central banks indicating satisfaction with current AI usage. Overall, only 9% of surveyed central banks said they were content with existing AI integration.

Most institutions currently use AI for data analysis, research, and back-office operations. However, adoption remains uneven, with more than 89% of central banks in advanced economies already using AI compared with just 44% in emerging markets.

Public investment funds are also increasing exposure to physical assets, particularly infrastructure and real estate. Nearly 60% plan to raise allocations to these sectors within the next two years. Interest in emerging markets is also strengthening, with 38% of public funds planning to boost investments in developing economies, up from 27% a year earlier. Meanwhile, interest in increasing allocations to developed markets has declined to 25% from 47% in the previous survey.

Despite broader diversification trends, the United States and China remain the most attractive investment destinations, largely driven by their leadership in artificial intelligence and technological innovation, according to the OMFIF survey.