Opinion | As the US dollar weakens, all that glitters is gold
The world must choose between believing in the authority of central banks to decide the worth of fiat currencies or trusting in gold as a store of value
Amid these crises, gold prices are now over US$5,500 per ounce, up over 27 per cent from the price on January 1. This comes after the price of gold jumped by 65 per cent in 2025 after soaring by 27 per cent in 2024.
At such returns, why should one even consider bonds that yield 4 per cent per annum with possible foreign exchange depreciation or fiscal default?
The foreign exchange reserves of all central banks stood at around US$13 trillion in 2025, with official gold holdings at 36,000 tonnes. At the current gold price of US$5,500 per ounce, central banks’ gold value would be US$6.37 trillion, which would bring central bank reserves (including gold) to US$19.37 trillion. Thus, gold represents nearly 33 per cent of total reserves which in turn would be 16.5 per cent of the world’s gross domestic product (GDP) in 2025.
The Trump administration’s policy gyrations and high levels of fiscal debt have caused major investors to reduce their dollar weighting in key portfolios, with the US dollar depreciating at least 6.4 per cent in real effective exchange rate terms in 2025. An example of high dollar exposure with no gold holdings is the largest sovereign wealth fund in the world, Norges Bank Investment Management, with US$2.1 trillion in assets, which held 53 per cent of its portfolio in US equities, bonds and real estate combined at the end of 2025. Norway is next door to Greenland.
Trump’s One Big Beautiful Bill Act, which front-loaded tax cuts and increased spending, was estimated by the Committee for Responsible Federal Budget to raise federal debt by US$15 trillion, or as much as US$31 trillion if tax cuts are made permanent, increasing the debt-to-GDP to an eye-popping 172-190 per cent of GDP.