The Future of the US Dollar and the Rise of Gold
The US dollar has reigned as the world’s dominant reserve currency for decades, underpinning the global financial system and America’s economic hegemony. However, a confluence of factors is leading analysts to predict the dollar’s eventual decline and replacement as the preeminent global currency. While such a transition would likely unfold over years, it could have profound implications for the world economy and geopolitical power dynamics.i
Several long-term trends are eroding the dollar’s supremacy. Foremost is the relative decline of the US economy compared to rising powers like China. As the US share of global GDP shrinks, so too does the natural demand for dollars in international trade and finance. The explosion of US government debt and continued fiscal deficits also undermine confidence in the dollar’s long-term stability.
Technologically, the rise of cryptocurrencies and central bank digital currencies (CBDCs) threatens to upend traditional currency systems. China is aggressively developing and promoting its digital yuan as an alternative to the dollar-centric SWIFT system for international payments. Other countries are exploring CBDCs as well, which could reduce reliance on the dollar as an intermediary currency.
Geopolitically, US sanctions and weaponization of the dollar-based financial system have pushed adversaries like Russia, Iran, and others to seek alternatives. Even allies in Europe and Asia are wary of overreliance on a financial system dominated by US interests and vulnerable to US policy whims. This is accelerating efforts to create new financial channels and settlement systems that bypass the dollar.
The petrodollar system that has undergirded the dollar’s global role is also under strain. Major oil producers like Saudi Arabia are increasingly willing to accept other currencies for oil sales. A shift away from dollar-denominated oil trading would be a major blow to the greenback’s international standing.
The euro faces its own structural challenges, while the Chinese renminbi remains tightly controlled and not fully convertible.
The short answer is gold. Time-honored inertia favors gold as the de facto currency.
Gold and its many forms will most likely be pegged to some currency and even cryptocurrency. Gold ETFs have been popular, and now Bitcoin Ordinals, so this is something we are excited about giving customers this portal.
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The implications of such a shift would be far-reaching. Firstly, the US economy would crumble overnight. Ultimately, the dollar’s fate is all but assured, dependent on future US economic performance, policy choices, and geopolitical developments. The dollar replacement will be gold in some form.
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