Joachim Klement said central banks’ gold holdings showed no statistically significant protection against currency declines after surprise Federal Reserve rate hikes, limiting the evidence that bullion can strengthen exchange-rate defenses.
In an Oct. 28 analysis published by Klement on Investing, Klement reviewed charts on currency responses to unexpected Fed moves. His summary links each surprise 10-basis-point rate increase with less depreciation where total foreign-exchange reserves were higher. One standard deviation more in those reserves — roughly 20 percentage points — was associated with 0.04 percentage points less depreciation. The same increase in U.S. dollar reserves was associated with 0.1 percentage points less depreciation.
Klement said non-dollar reserves had a much smaller, statistically insignificant effect. The 20-percentage-point figure describes the reserve difference; the 0.04- and 0.1-percentage-point figures describe the associated differences in currency depreciation.
The analysis focuses on how reserves may help central banks, particularly in emerging markets, resist pressure on their currencies against the dollar. Klement said a central bank can sell foreign currency and use the proceeds to buy its own currency. Dollar holdings can provide that liquidity directly, while gold can be sold to generate dollars.
Klement said the estimated effect for gold was similar in size to the total foreign-exchange reserve effect, but the uncertainty was higher and the result was statistically insignificant. He concluded that the analysis does not establish that gold improves exchange-rate stability compared with holding dollars directly.
Central-bank expectations for gold holdings have also been surveyed separately. The World Gold Council found that 89% of 76 respondents expected global official gold reserves to rise over the following 12 months, according to its 2026 survey, covered in EconoTimes’ report on reserve shares and gold expectations. That expectation concerns reserve holdings; it does not establish that gold reduces currency losses after Fed rate surprises.
