Driving effects of U.S. monetary policy and geopolitical risks on gold reserve share

Ziheng Liu, Jiahui Zhang, Ran Gu, Qizheng Hu and Shouchao He

International Review of Financial Analysis, 2025, vol. 105, issue C

Abstract: Using quarterly data from 105 countries from 2000 to 2023 and a theoretical model of central bank reserve portfolios that incorporates gold reserve, this study investigates the effects of United States (U.S.) monetary and geopolitical risks policy on the national gold reserve share. Results show that expansionary U.S. monetary policy, which increases dollar liquidity and lowers interest rates, generally prompts central banks to raise their gold reserve shares. A stronger positive correlation between the value of the U.S. dollar and gold assets further encourages this shift. Moreover, rising geopolitical risk has emerged as a key driver of central banks to increase their gold reserve share. Findings underscore gold's expanding role as a safe haven and a reserve asset comparable to the U.S. dollar. In response to U.S. monetary policy dynamics, China should pursue more diversified reserve asset strategies, enhance gold reserve management, and continue advancing Chinese yuan internationalization.

Keywords: U.S. monetary policy; Reserve assets; Gold; Geopolitical risks (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:105:y:2025:i:c:s1057521925004788

DOI: 10.1016/j.irfa.2025.104391

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