{"id":2800,"date":"2025-05-08T16:45:04","date_gmt":"2025-05-08T16:45:04","guid":{"rendered":"https:\/\/trusteconomics.eu\/?p=2800"},"modified":"2025-05-08T16:45:04","modified_gmt":"2025-05-08T16:45:04","slug":"central-banks-are-geometrically-increasing-their-purchases-of-gold-and-are-abandoning-the-dollar","status":"publish","type":"post","link":"https:\/\/trusteconomics.eu\/index.php\/2025\/05\/08\/central-banks-are-geometrically-increasing-their-purchases-of-gold-and-are-abandoning-the-dollar\/","title":{"rendered":"Central banks are geometrically increasing their purchases of gold and are abandoning the dollar"},"content":{"rendered":"\r\n

Record gold purchases by central banks signal a major shift in the monetary order \u2013 a shift in foreign exchange reserves and significant cracks in the dominance of the US dollar. Last week, the price of gold soared to another record high.<\/p>\r\n\r\n\r\n\r\n

While much of the buying has come from investors seeking safety in safe-haven assets, there is another key factor: central banks are buying gold at unprecedented levels, in part due to the de-dollarization process in global foreign exchange reserves.<\/p>\r\n\r\n\r\n\r\n

Amid a fragmented geopolitical landscape, central banks are stepping up their gold purchases to diversify reserves, amid growing concerns about dollar reliance. In trying to understand the rise of gold, the emergence of a multipolar world and a possible end to the era of Pax Americana, it is important to understand the history of the dollar and its role as a reserve currency. The price of gold has soared to a new record.<\/p>\r\n\r\n\r\n

\r\n
\"\"<\/figure>\r\n<\/div>\r\n\r\n\r\n

 <\/p>\r\n\r\n\r\n

\r\n
\"\"<\/figure>\r\n<\/div>\r\n\r\n\r\n

 <\/p>\r\n\r\n\r\n\r\n

For decades, the dollar has been and remains the dominant currency in international trade and the world\u2019s primary reserve currency. The U.S. government\u2019s large current account deficit has allowed the rest of the world to have the dollars needed to facilitate international trade.<\/p>\r\n\r\n\r\n\r\n

Stable regime<\/strong><\/p>\r\n\r\n\r\n\r\n

Current account surpluses are recycled into the U.S. government debt market, creating a flow of capital that has allowed the U.S. to finance its budget deficit.<\/p>\r\n\r\n\r\n\r\n

For decades, participants in this system and holders of U.S. debt have relied on a stable reserve regime supported by the rule of law. Stability has been further supported by an independent U.S. Federal Reserve, which ensures liquidity and market stability.<\/p>\r\n\r\n\r\n\r\n

The US served as the foundation of an open global trading system, supported by the economic and military might of the US government. This framework allowed the US to sustain both fiscal and current account deficits for decades.<\/p>\r\n\r\n\r\n\r\n

However, the US dollar\u2019s \u200b\u200bneutrality has eroded in recent years. While US President Donald Trump\u2019s recent trade policies have attracted considerable attention, the use of the US dollar as a geopolitical weapon has been a bipartisan strategy pursued under several presidential administrations.<\/p>\r\n\r\n\r\n\r\n

The dollar became a weapon<\/strong><\/p>\r\n\r\n\r\n\r\n

One of the most prominent examples occurred when Russia invaded Ukraine in 2022, prompting the US to freeze Russia and its allies\u2019 access to the US dollar and the SWIFT payment systems. This foreign policy playbook has been applied to many other nations, including Iran and North Korea.<\/p>\r\n\r\n\r\n\r\n

Over the past 20 years, formal sanctions have increased more than tenfold, with no other country imposing economic sanctions on a similar scale. While previous economic sanctions were largely limited to addressing violations of global norms, recent measures have increasingly been used to advance U.S. commercial and geopolitical interests.<\/p>\r\n\r\n\r\n\r\n

The dollar\u2019s \u200b\u200bdominance as the global reserve currency has made it one of the most powerful weapons in the U.S. arsenal.<\/p>\r\n\r\n\r\n

\r\n
\"\"<\/figure>\r\n<\/div>\r\n\r\n\r\n

 <\/p>\r\n\r\n\r\n\r\n

What was the impact?<\/strong><\/p>\r\n\r\n\r\n\r\n

The war in Ukraine accelerated dedollarization, as central banks around the world saw Russia\u2019s dollar reserves disappear virtually overnight. Central banks have been net buyers of gold since 2009, but have increased purchases more recently, with 2024 being a record year, as they added more than 1,000 tonnes to their holdings.<\/p>\r\n\r\n\r\n\r\n

A 2024 survey by the World Gold Council revealed that almost 70% of central banks plan to increase the share of gold in their reserves over the next five years, reflecting a deliberate shift away from dollar-denominated holdings in the face of rising geopolitical and economic risks.<\/p>\r\n\r\n\r\n\r\n

Importantly, this increase in the gold market spans a wide range of countries, not just those at odds with US interests. The top three buyers in 2024 were Poland, Turkey and India.<\/p>\r\n\r\n\r\n\r\n

However, the US dollar remains the cornerstone of global trade and finance and is not expected to lose its status as a major currency anytime soon. Quarterly gold demand from central banks (in tonnes).<\/p>\r\n\r\n\r\n

\r\n
\"\"<\/figure>\r\n<\/div>\r\n\r\n\r\n

 <\/p>\r\n\r\n\r\n\r\n

How much more gold could central banks buy?<\/strong><\/p>\r\n\r\n\r\n\r\n

Gold currently accounts for about 18% of total global reserves, but excluding major Western holders such as the US, Germany, France and Italy, that figure drops to just 11%.<\/p>\r\n\r\n\r\n\r\n

Despite recent record purchases, gold\u2019s share of global reserves remains near its lowest level in several decades. In the 1950s, gold made up more than 70% of global reserves.<\/p>\r\n\r\n\r\n\r\n

If central banks were to approach historical standards, there could still be significant room for additional accumulation.<\/p>\r\n","protected":false},"excerpt":{"rendered":"

Record gold purchases by central banks signal a major shift in the monetary order \u2013 a shift in foreign exchange reserves and significant cracks in the dominance of the US dollar. Last week, the price of gold soared to another record high. While much of the buying has come from investors seeking safety in safe-haven … <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,391],"tags":[527,215,939,83,82,775,180],"class_list":["post-2800","post","type-post","status-publish","format-standard","hentry","category-financial-markets","category-market-analyses","tag-central-banks","tag-current-account","tag-current-account-balance","tag-dollar","tag-gold","tag-reserve-currency","tag-trade-war"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2800","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/comments?post=2800"}],"version-history":[{"count":2,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2800\/revisions"}],"predecessor-version":[{"id":2808,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/posts\/2800\/revisions\/2808"}],"wp:attachment":[{"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/media?parent=2800"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/categories?post=2800"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/trusteconomics.eu\/index.php\/wp-json\/wp\/v2\/tags?post=2800"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}