The global de-dollarization phenomenon has reached a pivotal stage, with JPMorgan Chase revealing that US dollar reserves have dropped below 60 percent for the first time in twenty years. As 71 countries reduce their dollar holdings, central banks are increasingly turning to gold at rates unseen before, raising significant concerns about America’s economic supremacy going forward.
71 Countries De-Dollarize While Gold and JPMorgan Warnings Rise
JPMorgan Issues Warning on Accelerating Shift
Currently, data clearly illustrates the trend of global de-dollarization. Central banks’ dollar-denominated securities have decreased by $59 billion in 2024, and this pace is gaining momentum. At the close of last year, dollars represented just 57.8 percent of global reserves, marking the lowest level since 1994 and a notable 7.3 percent reduction over ten years. Back in 2002, dollars made up about 72 percent of reserves, highlighting a significant transformation.
JPMorgan’s insights highlight an important aspect regarding gold amid this shift. Although emerging market central banks still maintain relatively low gold reserves at 9 percent, these holdings have more than doubled from 4 percent just a decade ago. The consequences of de-dollarization for the US are becoming increasingly evident as the trend progresses.
“Although foreign demand has not kept pace with the growth of the Treasury market for more than a decade, we must consider what more aggressive action could mean. Japan is the largest foreign creditor and alone holds more than $1.1 trillion in Treasuries, or nearly 4 percent of the market. Accordingly, any significant foreign selling would be impactful, driving yields higher.”
Gold Purchases Surge Amid Global Shift
Central banks currently hold about 36,000 metric tons of gold, having increased their reserves by over 1,000 metric tons annually in the past three years. This pace doubles that of the previous decade. With gold prices now exceeding $3,500 per ounce, their holdings are valued at approximately $4.5 trillion, surpassing the $3.5 trillion held in US Treasuries.
Leading the purchases in 2024, Poland added 90 tons to reach 448 tons, representing roughly 17 percent of its reserves. Türkiye increased its gold holdings by about 75 tons the same year. Together, the US, Germany, Italy, France, and Russia account for over 18,700 metric tons. These acquisitions directly reflect the de-dollarization trend, as nations diversify away from dollar assets and seek protection from geopolitical risks.
Disadvantages of De-Dollarization Mount for US Economy
Washington faces rising drawbacks from this shift. Foreign holdings of US Treasuries have fallen to 30 percent as of early 2025, down from 50 percent during the Great Recession, illustrating a consistent fifteen-year decline. Interest payments on the national debt reached $144.6 billion in just June, totaling $921 billion annually—a 6 percent increase over the previous year.
What’s Driving Countries Away from the Dollar
The pace of de-dollarization, involving 71 nations, accelerated sharply after the US froze $300 billion of Russian reserves in 2022. Data from the World Gold Council shows 76 percent of central banks intend to grow their gold holdings within the next five years, while 75 percent plan to cut back dollar-denominated assets. The People’s Bank of China holds 2,300.4 metric tons, and India has been gradually rebalancing its portfolio by increasing gold assets while reducing exposure to US Treasuries.
In the bond market, the effects of de-dollarization are also clear. The federal government is grappling with higher borrowing costs caused by increasing yields combined with weak demand for Treasuries. As global demand for dollars diminishes, these funds will flow back to the US, potentially creating a surplus of dollars and pushing inflationary pressures higher domestically. This global movement away from the dollar presents substantial threats as the world’s reserve currency loses its dominant role in international finance, with ongoing developments unfolding.
Original article: watcher.guru
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