Global Tensions Now Top Central Bank Risk

Central banks around the world are increasingly prioritising geopolitical tensions as their biggest risk, according to a survey conducted by Central Banking Publications between January and March. The poll covered nearly 100 institutions that collectively manage more than $9.5 trillion in reserves. Almost 70% of respondents ranked geopolitics as their top concern, a sharp rise from 35% in 2024, and it moved ahead of U.S. trade protectionism as the leading worry.

The survey also shows a shift in how reserve managers think about the medium-term environment. Inflation and interest rates remain the most important factors for reserve management over a five-year horizon, cited by just over half of central banks. However, that share fell from 76% last year, suggesting that while price and rate dynamics still matter, they are no longer as dominant in planning assumptions as they were previously.

Geopolitics is not only a near-term concern in the survey results. Almost 30% of respondents cited geopolitical issues as a key factor in their five-year outlook, which is double the share from the previous year. The increase indicates that a larger portion of reserve managers now see geopolitical risk as persistent rather than temporary, and as something that can influence reserve strategy alongside traditional macroeconomic variables.

Another theme in the findings is the evolving view of the U.S. dollar’s role in reserves. The dollar remains widely seen as the primary safe-haven currency, with 80% of reserve managers holding that view. At the same time, the survey notes that the currency’s dominance is being questioned more frequently, reflecting a more contested debate among reserve managers even as the dollar retains its central position.

The survey also points to softer expectations for U.S. bonds relative to other major markets. Only a third of respondents said they expect U.S. bonds to outperform those of other G7 economies and China, down from over half last year. The change signals reduced confidence in relative performance, a factor that can influence how central banks weigh allocations across sovereign bond markets when managing liquidity, safety, and returns.

Gold appears to be benefiting from the uncertainty captured in the survey. Nearly three-quarters of central banks reported holding gold in their reserves, and almost 40% said they are considering increasing exposure. The combination of heightened geopolitical concern, questions around the dollar’s dominance, and weaker relative expectations for U.S. bonds helps explain why gold remains prominent in reserve discussions, even as central banks continue to balance safety and diversification goals.