Gold is now a vehicle of central bank revolt against the U.S. dollar. Find out more
Thus the oldest and most traditional of assets, gold, is now a vehicle of central bank revolt against the dollar. Often in the past both the dollar and gold have been seen as havens, but now gold is seen as much safer. During the short, gold kept rising while the dollar drifted down. The difference in the movement of the two has never been so large.
And why are emerging nations rebelling now, when global trade has been based on the dollar since the end of the Second World War? Because the United States and its allies have increasingly turned to financial sanctions as a weapon., the EU, Japan and the UK — up from 10 per cent in the early ’90s. Until recently, most of the targets were small.
Too confident in the indomitable dollar, the U.S. saw sanctions as a cost-free way to fight Russia without risking troops. But it is paying the price in lost currency allegiances. Nations cutting deals to trade without the dollar now include old U.S. allies such as the Philippines and Thailand. The number of countries with central banks looking at ways to launch their own digital currency has tripled since 2020 to more than 110, representing 95 per cent of the world’s gross domestic product. Many are testing these digital currencies for use in bilateral trade — another open challenge to the dollar.
Though some doubt a dominant dollar matters for the U.S. economy, high demand for the currency in general tends to lower the cost of borrowing abroad, a privilege America sorely needs today. Among the top 20 developed economies, it now has the second highest fiscal and current account deficits after the U.K. and the second highest foreign liabilities after Portugal.Article content
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