As the US dollar weakens, all that glitters is gold
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In 2025, gold prices surged over 27% following significant increases in the previous two years, driven by global uncertainties including US foreign policy and economic concerns. The weakening US dollar, depreciating by 6.4% in real effective exchange rate terms, prompted major investors to reduce their dollar holdings. Central banks' gold reserves reached an estimated value of $6.37 trillion, representing nearly 33% of total reserves. The Trump administration's fiscal policies, including tax cuts and increased spending, are projected to substantially increase the US federal debt, further contributing to economic uncertainty and the appeal of gold as a safe haven asset. Norges Bank Investment Management, a large sovereign wealth fund, held a significant portion of its portfolio in US assets, highlighting the potential impact of dollar depreciation on global investments.
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