Gold replaces US Treasuries as top reserve asset, ECB says
ft.com
ft.com
Central banks have been buying gold aggressively since 2022 as a response to USD reserve weaponization, and gold has rallied 70% in that window.
The headline can be erroneously interpreted as de-dollarisarion.
> The headline can be erroneously interpreted as de-dollarisarion.
These statements appear somewhat contradictory. If reserves are buying gold instead of dollars and the effect is that the value of gold is increasing, wouldn't the underlying reason still be de-dollarisation?
What does "achieved" mean? The concept of de-dollarization does not entail that dollar use drops to ~0.
> The dollar is still ~58% of global reserves. It would take decades.
This seems to falsely imply that it could take decades before American consumers feel the effects, and it also overlooks the fact that there are realistic if still relatively unlikely worst-case scenarios in which the US loses its "exorbitant privilege" much faster.
The USD was ~70% of global reserves in 2000. Most of that decline isn't actually due to "de-dollarization" per se, but this is the problem: causation is really hard to untangle.
Nobody credible, for example, believes that America's rising borrowing costs are due primarily to de-dollarization, but the rising term premium does realistically reflect investors demanding more to hold US debt.
Erosion of confidence in US fiscal sustainability and institutions is one of the main drivers behind de-dollarization and because it shows up in bond markets as a risk premium, you can't cleanly separate how much of the rising term premium comes from that versus factors like Fed policy and Treasury supply.
Central banks and the IMF only own less than 20% of all the gold ever mined: it's probably not the one or two additional percent they bought that made the prices skyrocket by 70%.
For example used supercars and hypercars' values have gone through the roof too: and that's for sure not because central banks are stockpiling those.
Causation / correlation and all that.
What are the causes of dedollarization? What does de-dollarization indicate?
Dedollarisation > Causes: https://en.wikipedia.org/wiki/Dedollarisation#Causes
Gold as an investment: https://en.wikipedia.org/wiki/Gold_as_an_investment
Gold has intrinsic value at cost in printed circuit boards, medical equipment, medical devices, space shielding.
Does investing in gold cause growth?
The dumbest thing the US has ever done. It's like a tech company intentionally sabotaging its own customer ecosystem...
Also, it'd be interesting to know how many and how much $ is going into currency swap lines to avoid bond dumps and keep yields under control.