(Mike Maharrey, Money Metals News Service) Contrarians have been talking about the threat of de-dollarization for a long time. I was doing interviews about weaponizing the dollar in 2018 and the potential blowback, long before Russia invaded Ukraine. Back then, people mostly blew me off, assuring me that the dollar’s role as the global reserve currency would protect it.
Today, many in mainstream financial circles seem to be changing their tune and waking up to the fact that the dollar is in trouble. Just last month, the Guardian ran an article headlined, “The dollar is losing credibility.”
We see this de-dollarization trend most clearly in central banks’ scramble for gold.
Central bank gold buying moderated in 2025 but remained far above the recent historical average.
Last year was the fourth-largest expansion of central bank gold reserves on record. The all-time high was set in 2022 (1,136 tonnes). It was the highest level of net purchases on record, dating back to 1950, including since the suspension of dollar convertibility into gold in 1971.
As central banks expand their gold reserves, they are shedding U.S. Treasuries. As of last summer, central banks globally held more gold than Treasuries for the first time in nearly 30 years.
A JPMorgan note in August said this reveals the waning dependence on the U.S. dollar in trade that is being reflected in the gold market.
“The main de-dollarization trend in FX reserves, however, pertains to the growing demand for gold. … This increased demand has in turn partly driven the current bull market in gold, with prices forecast to climb toward $4,000/oz by mid-2026.”
Three policies have undermined global confidence in the dollar.
Central bank gold buying surged after the U.S. and its Western allies aggressively sanctioned Russia after the invasion of Ukraine.
Using dollars as weapons may seem like an effective way to keep the “bad guys” in line, but it comes with risk.
If you’re worried that the U.S. and its allies might cut off your access to dollars, what would you do?
Minimize your dependence on dollars.
In other words, if you are concerned that the U.S. could pull the “dollar rug” out from under you, why not pull out from the dollar system first? Or at least minimize your exposure to it?
This is exactly what’s happening.
U.S. tariff policies have also increased global wariness. As the Guardian article framed it, the Trump administration has “shattered the global rules-based order.”
Again, you can argue that this is a good thing, but it also comes with potential blowback.
Finally, the world is increasingly wary of America’s fiscal malfeasance. Even with booming tariff revenues, the federal government continues to run massive budget deficits, driving the unsustainable national debt higher by the day.
As the Bipartisan Policy Center points out, the growing national debt and the mounting fiscal irresponsibility undermine the dollar.
“Confidence in U.S. creditworthiness may be undermined by a rapidly deteriorating fiscal situation, an increasing concern with federal debt set to grow substantially in the coming years.”
This is how the Guardian article summed it up.
“The dollar’s status is dwindling, reflecting Trump’s erratic policymaking – including interference at the Fed and the fragile U.S. public finances – as well as Washington’s readiness to deploy economic sanctions. This includes the targeting of Russian central bank reserves after Vladimir Putin’s invasion of Ukraine.”
It’s important to note that it doesn’t matter whether you agree with the assessment. The fact that many are coming to this conclusion has significant ramifications.
It’s easy to write off complaints about U.S. policy as foreign whining and adopt a “who cares what they think” mentality. This sentiment may even be justified. However, what the rest of the world thinks matters, whether Americans want to acknowledge it or not, and the world is increasingly thinking dollars aren’t worth holding on to.
Carmignac chief economist Raphaël Gallardo told the Guardian, “We have moved from Pax Americana to global discord, geopolitically. It is the law of the jungle when we see what the U.S. are doing.”
“Investors – private and sovereign – believe their strategic reserves are no longer safe in dollar terms, as they can be confiscated overnight. The dollar is losing the credibility as the nominal anchor of the global monetary system because the Fed is losing credibility, and U.S. Congress is losing its credibility.”
Of course, other fiat currencies are no better. The dollar has its problems; however, it is still arguable the cleanest dirty shirt in the laundry. Gallardo conceded, “There is no one to replace the dollar.”
“So gold is shining by default. People are returning to what [British economist John Maynard] Keynes called the ‘barbarous relic’, as it is nobody’s debt.”
Gallardo is referring to one of gold’s enduring qualities. It comes with no counterparty risk. On top of that, governments can’t print gold and devalue it as a matter of policy. To the contrary, gold reflects the constant devaluation of fiat currency.
Based on a survey of 50 central banks by Invesco, about half said they plan to increase their gold reserves. Two-thirds said they plan to repatriate their gold, bringing it safely back within their country’s borders.
Invesco’s head of official institutions called gold “the ultimate safe haven.”
“So, in times of political uncertainty and instability, you see gold spikes in terms of central banks. It’s a form of protection and a backstop if traditional fiat currencies fail.”
Even with this de-dollarization trend, the dollar isn’t in immediate danger of losing its reserve status. However, even a modest de-dollarization could spell big trouble for the U.S. economy.
The United States needs the world to need dollars. The global demand for dollars allows the Federal Reserve to expand the currency far faster than it otherwise could without serious inflationary problems. Money creation enables the federal government’s borrowing and spending habits.
If the world needs fewer dollars, they will begin to return to the U.S., causing a dollar glut. This will increase inflationary pressure domestically as the value of the U.S. currency further depreciates. In the worst-case scenario, the dollar could collapse completely, leading to hyperinflation.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
