The US dollar has been under pressure, drawing attention to longer-term changes in how global reserves are held. Morgan Stanley Research said recent market moves sit alongside a slow but persistent adjustment in the dollar’s international role.
In its latest Global Idea report, Morgan Stanley said the dollar’s share of global usage has been edging lower for years. Over the same period, the firm found that gold has been gaining share steadily within central bank reserve portfolios.
According to Morgan Stanley, this process is not being driven by another currency replacing the dollar. Instead, gold is absorbing a growing portion of official reserves.
RBI and gold repatriation signal a broader reserve trend
“Repatriation of gold has also been a focus,” Morgan Stanley said.
Morgan Stanley said that where gold is stored has become increasingly important for central banks. The firm noted a clear rise in domestic storage of bullion, reflecting a preference for physical control over reserve assets.
India was cited as a prominent example. Morgan Stanley said India now holds about 65% of its gold reserves domestically, up from around 40% in 2021.
The report added that 59% of central banks now store some gold at home, compared with 41% in 2024. Morgan Stanley also pointed to Poland’s repatriation of more than 100 tonnes of gold and noted that China has begun offering storage services to other countries.
Dollar still dominates, but its international footprint is falling
“US dollar’s international footprint continues a gradual downward trajectory,” Morgan Stanley said.
The firm said the US dollar remains the most influential currency globally, even as its share across several measures declines.
Morgan Stanley noted that the fall is most visible in central bank foreign exchange reserves, with smaller declines in FX corporate bond issuance and emerging-market sovereign borrowing.
IMF data cited by the firm shows the dollar’s share of global FX reserves fell to 56.9% in Q3 2025, down from 57.9% a year earlier. Morgan Stanley said adjusting for valuation effects does not alter the trend.
No currency has replaced the dollar
“Despite the declining share, US dollar remains comfortably the largest presence in central bank FX reserves,” Morgan Stanley said.
The firm said the dollar’s reduced share does not indicate that another currency has taken its place.
According to the report, the euro and the Japanese yen have gained modestly in reserve allocations, while the Chinese yuan’s share has remained stable at around 2%.
When six indicators of global currency usage are averaged, Morgan Stanley said the dollar’s share has slipped below 50% for the first time since at least 2001, while still remaining far ahead of any alternative.
“However, the picture is different if gold is considered – gold has risen from 14% of holdings to 25–28% currently and shows no sign of stopping,” Morgan Stanley said.
The report said gold has steadily increased its share of central bank reserve assets over the past two decades.
Gold is gaining share where currencies are not
Morgan Stanley said this rise has come at the expense of fiat currencies, whose combined share of reserves has declined as bullion allocations increased.
The firm attributed the increase to sustained official purchases and higher gold prices, which have raised the value of existing holdings.
Central banks hold more gold than US Treasuries
“Foreign central banks now hold more in gold than US Treasuries for the first time since 1996,” Morgan Stanley said.
The firm estimated that central banks hold around $4 trillion in gold, compared with approximately $3.9 trillion in US Treasury securities.
Morgan Stanley said this marks an important change in reserve composition, with bullion now rivaling government bonds as a core reserve asset.
The report added that this comparison reflects both rising gold purchases and the appreciation in gold prices over recent years.
2022 marked a structural change in gold buying
“2022 marked a structural shift in central bank gold buying behaviour,” Morgan Stanley said.
The firm said annual central bank gold purchases doubled to more than 1,000 tonnes per year after 2022.
Morgan Stanley linked this change to geopolitical developments, noting that official sector demand remained strong even as prices rose.
Although buying slowed somewhat in 2025, the firm said volumes remain well above historical averages.
Gold holdings vary widely across countries
“Collectively, central banks hold ~36,500 tonnes of gold or around 17% of all the gold that has ever been mined,” Morgan Stanley said.
The firm said gold’s share of reserves differs significantly across countries.
According to the report, the United States, France, Germany and Italy each hold more than 75% of their reserves in gold. India’s gold share stands at about 17%, while China’s is around 8.3%.
Morgan Stanley said these differences reflect national reserve strategies rather than market access constraints.
Survey data point to continued gold accumulation
Morgan Stanley cited survey data showing that central banks expect gold buying to continue.
The firm said 43% of respondents in the World Gold Council survey expected their gold reserves to rise over the next 12 months, while none expected a decline.
Morgan Stanley noted that central banks cited gold’s performance during periods of stress, portfolio diversification, and inflation hedging as key reasons for holding more bullion.
The report added that it is unusual for central banks to publish formal gold targets, though some exceptions have emerged.
Policy factors may add pressure on the dollar
“On net, we think policy factors are neutral to slightly accelerating this transition away from the USD,” Morgan Stanley said.
The firm pointed to elevated US debt levels, trade policy uncertainty and sanctions usage as factors that could weigh on foreign demand for dollar assets.
Morgan Stanley also noted that geopolitical developments can have mixed effects, as military alliances support dollar holdings while higher global risk encourages diversification.
The report said these forces pull in different directions, making the net impact difficult to quantify.
Conclusion: Dollar leads, gold gains share
“Despite the declining share, US dollar remains comfortably the largest presence in central bank FX reserves,” Morgan Stanley pointed out.
The brokerage firm concluded that the dollar continues to dominate global finance, even as its share declines gradually.
At the same time, Morgan Stanley said gold is the only reserve asset consistently gaining share, absorbing reallocation amid what the firm described as “multipolar world pressures.”