Strong dollar equals falling gold price, right? Except, perhaps, when Asia’s central bankers are involved. Three-quarters of the region’s $5 trillion in foreign-exchange holdings are parked in U.S. dollars. A desire to diversify away from the greenback, though, has become evident. The dollar’s share in reserve accumulation dropped to less than 30% in the third quarter, Barclays Capital estimates.
Admittedly, knowing exactly what is in central-bank reserves takes guesswork, but analysts think most diversification in 2009 favored the euro. Recently, gold has turned up as a second alternative. The Reserve Bank of India stirred markets when it revealed it purchased 200 tons of gold from the International Monetary Fund in October, increasing gold’s share of central bank reserves to 6.4% from 3.6%.