Central Banks Eye Gold Reserves, Trim Dollar Holdings

Central banks are increasingly eyeing their gold reserves as they trim their dollar holdings, a move that highlights the growing uncertainty surrounding the US currency's status as the global reserve currency."We're seeing a shift away from the dollar," said Jeffrey Frankel, a former chief international economist at the Federal Reserve. "This is not necessarily a bad thing, but it does mean that we need to think more carefully about how we manage our foreign exchange reserves."The move by central banks to diversify their reserves comes as the US currency faces growing competition from other major currencies like the euro and yen. The shift is also being driven by concerns over the impact of a potential trade war on the global economy."I think it's a sign that there's a growing recognition that the dollar is not the only game in town," said Charles Goodhart, an economics professor at London School of Economics. "Central banks are getting more sophisticated and they're recognising that diversification makes sense."The shift away from the dollar has been gradual, with many central banks having already reduced their dollar holdings in recent years. However, the pace of change is accelerating, with some countries such as Russia and China looking to reduce their reliance on the US currency."It's a trend that will continue," said Frankel. "Central banks are getting more worried about the risks associated with holding too much foreign exchange."