- Central banks globally are reducing their US dollar reserves, pushing its share in foreign exchange reserves down to a record 58%, according to JPMorgan.
- Over the past five years, gold’s share in these reserves has risen from 11% to 15%, reflecting an ongoing shift towards this traditional asset.
Financial titan JPMorgan has identified an escalating pattern of de-dollarization, as central banks worldwide decrease their US dollar holdings. According to a recent Reuters report, JPMorgan strategists Meera Chandan and Octavia Popescu disclose that the dollar’s share in the foreign exchange reserves of central banks has dropped to an unprecedented 58%.
The trend of de-dollarization becomes even more pronounced when considering the robust accumulation of gold by central banks over the past half-decade. Chandan and Popescu report that gold’s share in reserves has grown from 11% to 15% within five years.
Swiss multinational investment bank UBS chimed in last month, stating that central banks are poised to amass 700 metric tons of gold worth $48.74 billion this year. This move away from the US dollar appears to be prompted by concerns around geopolitical instability and persistent inflation.
The JPMorgan strategists noted that
“Some signs of de-dollarization are emerging.”
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Despite the ongoing dominance of the US dollar in global trade settlements, they anticipate this de-dollarization trend to persist.
The dollar and the euro have maintained a stable presence in trade invoicing over the past few decades, accounting for 40% to 50% of the total. The dollar’s contribution to foreign exchange trading volumes is nearing its all-time high of 88%, demonstrating its enduring influence.
Furthermore, the dollar dominates SWIFT payments, accounting for 43% of the total, while the euro represents 32%, and the Chinese yuan stands at a modest 2.3%. This disparity highlights the entrenched role of the dollar in global finance. However, the gradual increase in gold reserves suggests a slow but noticeable shift in central banks’ strategy, signaling a possible pivot away from the US dollar towards more tangible assets.
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