The U.S. dollar is the most commonly held currency in the world, the most widely used in international trade, and it dominates international investments. And the greenback’s preeminent role in the global economy has delivered big benefits for the United States — from the ease of federal borrowing to the ability to impose crippling financial sanctions on other countries.
But its role is being challenged by a host of non-traditional currencies, and its monetary dominance is steadily eroding. And as “the buck” loses its luster amid shifting geopolitical alliances, gold is emerging as an alternative global reserve asset.
When Privilege is Squandered
The U.S. Council on Foreign Relations refers to the dollar’s historic role in the world monetary system as a “hegemony” which essentially means one of significant influence.
“The U.S. government, economy, and citizenry reap huge benefits from the dollar’s ‘exorbitant privilege,’ as a former French finance minister called it, in global financial markets. Because of the strong global demand for U.S. dollars and dollar-backed securities such as U.S. treasury bonds, the United States can borrow at far lower interest rates than other countries. The U.S. government and firms are also able to borrow from foreign creditors in dollars rather than foreign currencies, so the value of the debt does not change with fluctuations in exchange rates. A high demand for the dollar also strengthens its value vis-à-vis other currencies, leading to cheaper products for U.S. consumers.”1https://www.cfr.org/blog/future-dollar-hegemony
The dollar’s “hegemony” has enabled the U.S. to float massive deficits that would debilitate most other nations. But America’s soaring national debt is now starting to deteriorate its fiscal soundness and that is starting to both overwhelm and undermine the strength of the dollar’s historic privilege.
“On Tuesday, Moody’s added to the growing list of U.S. debt warnings in a report that sounded the alarm on the deteriorating fiscal situation. The ratings agency said America’s triple-A grade increasingly relies on ‘extraordinary economic strength and the unique and central roles of the dollar and Treasury bond market in global finance.’ Moody’s noted higher interest rates have made debt less affordable. That’s partly a result of rate hikes from the Federal Reserve to rein in inflation as well as massive deficits under President Joe Biden.”2https://www.aol.com/finance/soaring-us-debt-may-start-130300769.html
During a recent episode of the Joe Rogan Experience, Elon Musk issued this dire warning about U.S. debt, interest on that debt, and the threat to America’s most coveted entitlement programs:
“The country is going bankrupt. If we don’t take action, the dollar’s going to be worth nothing … if we don’t do something, the entire government budget will be paying interest — there won’t be money for anything. No, there won’t be money for Social Security, there won’t be money for Medicare, nothing. That’s where we’re headed. That’s what bankruptcy means.”3https://moneywise.com/investing/musk-says-america-will-be-toast
Growing Challenges to the Buck
The future of the dollar’s role as the world’s reserve currency was also recently addressed at The World Economic Forum’s Annual Meeting in Davos in January. The world’s leading economists acknowledged a gradual shift from dollar dominance due to geopolitical fragmentation and changes in the world’s financial architecture.
China, for instance, has established 40 bilateral currency swap lines with developing countries as part of a long-term strategy to reduce dependence on the dollar. China’s share of trade in renminbi (the currency of the People’s Republic of China) has grown from 20% ten years ago to 56% today.4https://www.weforum.org/stories/2025/01/us-dollar-will-be-indispensable-until-not
According to U.S. News & World Report after a period of relative stability, global calls for de-dollarization have likewise returned following the levying of U.S. sanctions on Russia after their invasion of Ukraine and America’s ongoing battle with persistent inflation:
“Against this backdrop, leaders of countries such as China, India and Brazil have been calling for moves to trade directly with each other in their own currencies while cutting the U.S. dollar out of the equation. This change would incrementally diminish the role and importance of dollars while creating a multipolar financial world where the next tier of economies would have significantly more say in global affairs.”5https://money.usnews.com/investing/articles/de-dollarization-what-happens-if-the-dollar-loses-reserve-status
Trump’s recent tariff war is also accelerating movement away from the dollar as the global reserve currency — as European leaders now see an opening for a larger and more dominant role for the Euro in global commerce.
“As the US president tears up his nation’s economic playbook — creating market turmoil globally — some of Europe’s policymaking elite sense a window of opportunity for the continent’s single currency … The door is opening as Trump shakes the foundations of the dollar as the world’s global currency. He’s upending commerce with tariffs and verbal attacks on both friends and foes, weakening commitments to NATO, and advisors have talked of a so-called Mar-a-Lago Accord that could reorder global finance.”6https://www.bloomberg.com/news/articles/2025-03-28/macron-sizes-up-opening-for-the-euro-as-trump-rattles-dollar
The World’s “Real” Reserve Currency
As the risks to the dollar continue to mount central banks have been buying gold at the fastest pace in history.
“Gold’s role as a protective asset continues to strengthen, reinforcing its upward trajectory … several nations, including China and India, are actively increasing their gold reserves to diversify away from the dollar’s dominance. Currently, central banks worldwide hold an average of 10% of their reserves in gold, but forecasts suggest this could rise to over 30% in the coming years. Such a shift would provide ongoing support for gold prices.”7https://www.investing.com/analysis/gold-vs-us-dollar-can-the-precious-metal-replace-the-worlds-reserve-currency-200658904
The largest gold buyers over the past few years include China, Russia, Poland, India, Turkey and Uzbekistan who see gold as a store of value that works well as a viable reserve asset.
“The desire to use the dollar less in international finance is a big reason why gold has gained more than 30% this year and touched new records. It’s usually considered a haven asset whose price goes up when there is a lot of uncertainty or to hedge against inflation … Gold’s record as a store of value goes back thousands of years, so it works well as a reserve.8https://www.barrons.com/articles/dollar-gold-china-russia-brazil-brics-3b0ce1a4
From the perspective of the International Monetary Fund, a body that seeks to promote global growth and stability, gold is a critical global reserve asset. The IMF is among the world’s largest holder of gold and a 2023 working paper describes gold’s role as a vital international reserve asset, particularly in response to financial sanctions like those currently in play in the second Trump presidency:
“After moving slowly downward for the better part of four decades, central bank gold holdings have risen since the Global Financial Crisis … First, gold appeals to central bank reserve managers as a safe haven in periods of economic, financial and geopolitical volatility, when the return on alternative financial assets is low. Second, the imposition of financial sanctions by the United States, United Kingdom, European Union and Japan, the main reserve-issuing economies, is associated with an increase in the share of central bank reserves held in the form of gold.”9https://www.imf.org/en/Publications/WP/Issues/2023/01/27/Gold-as-International-Reserves-A-Barbarous-Relic-No-More-528089
The dollar’s growing instability combined with what other countries consider to be its weaponization, has resulted in its slow and steady fall from grace and that has directly benefited gold and the countries and individuals who choose to acquire it.
This article was brought to you by Orion Metal Exchange
a top-rated gold dealer with “live” product pricing
and best-in-class customer service.
Get a FREE Investor Kit and up to $30,000 in FREE metals (on qualifying purchases).
REPRESENTATIVES ARE AVAILABLE NOW AT: 1-800-559-0088
1 https://www.cfr.org/blog/future-dollar-hegemony
2 https://www.aol.com/finance/soaring-us-debt-may-start-130300769.html
3 https://moneywise.com/investing/musk-says-america-will-be-toast
4 https://www.weforum.org/stories/2025/01/us-dollar-will-be-indispensable-until-not
8 https://www.barrons.com/articles/dollar-gold-china-russia-brazil-brics-3b0ce1a4
