On Monday, even as the US dollar fell to a four-month low, the price of gold crossed the $5,000-per-ounce mark for the first time. The yellow metal’s historic rally is showing no signs of slowing down, with even the smartest and biggest institutions in the world – and not just small-time investors like households – continuing to pile in on gold. One category of these smart and big investors is central banks.
Take the Reserve Bank of India (RBI), for instance. Last week, data from the Indian central bank showed that its foreign exchange reserves were up more than $14 billion as on January 16 – the biggest weekly increase in 10 months. However, nearly a third of this rise was due to the RBI’s gold kitty of 880 tonnes appreciating in value. Over the past year, the value of RBI’s foreign currency assets – which predominantly make up the forex reserves – has increased by just 5% even as total reserves rose 12%. What has been the primary driver? Gold, with the value of the RBI’s holdings up 70%.
The RBI, though, hasn’t even been the biggest buyer of gold over the last year. In fact, the RBI’s gold holdings only increased by 4 tonnes or so in 2025. Leading the charge were the central banks of Poland (95 tonnes), Kazakhstan (49 tonnes), and Brazil (43 tonnes), as per World Gold Council data until November 2025.
But central banks buying gold is not news. What matters is gold’s relative position in what these banks hold as reserves; the RBI, for example, now holds 17% of its forex reserves as gold, up from 12% a year ago. The reason, directly and indirectly, is US President Donald Trump.
Debasement of US dollar
In a note last week, economists from Morgan Stanley said that Trump’s policies on trade and sanctions, among other factors, and the shift to a multipolar world are key to pushing people away from the US dollar.
“On net, we think these factors are neutral to slightly accelerating this transition away from the dollar, but their evolution over the near term will likely be critical in determining the extent of this shift,” Morgan Stanley said.
Trump has made no secret about maintaining the US dollar’s global supremacy, even threatening the BRICS nations with 100% additional tariff should they move forward with a common currency to “degenerate” and “destroy” the dollar. De-dollarisation, after all, can shift the balance of power away from the US and weaken its ability to shape the world economy and global financial markets in its image.
At the same time, everything Trump has done has weakened the greenback’s status in the eyes of foreign beholders, resulting in the US dollar weakening by 9% in 2025 – the most in almost a decade. This has helped drive the rise in gold prices, with the demand for safe-haven assets on the up amid Trump’s sabre-rattling and policy uncertainty.
Weaponising flows
According to JP Morgan analysts, de-dollarisation has been most visible in commodity markets. In a note last year, the investment bank said that “a large and growing proportion of energy is being priced in non-dollar-denominated contracts”. However, this is also showing up in sovereign debt. The RBI, for instance, has sharply lowered its holdings of US government bonds: in November 2025, holdings by India stood at $186.5 billion, down for the sixth month in a row. In November 2024, the figure was $234 billion. Meanwhile, China’s holdings of US government debt are at a 16-year low.
Others are threatening more vocally. Last week, Danish pension fund AkademikerPension said it plans to get rid of its holdings of US Treasuries by the end of January, with Trump’s talk of taking over Greenland being one of the several reasons for the move, including the unsustainable finances of the US government. This followed three other pension funds from Denmark, which has taken a dim view of US government bonds. The weaponisation of capital flows was warned by Deutsche Bank earlier this month, when it said in a note that Trump’s threats against Europe could lead to the continent cutting its holdings of US debt. “Markets are increasingly discussing the de-dollarisation theme,” Nomura analysts said in a note on January 21.
Trump has already promised “big retaliation” in response to European countries dumping US government bonds. The European Union held around $10.4 trillion of US portfolio assets – accounting for 29% of foreign ownership of these assets – as of November 2025.
The past and future
The diversification of forex reserves away from the dollar and assets denominated in it received a big push after the US froze Russia’s reserves following its invasion of Ukraine in February 2022. But signs of de-dollarisation, or at least a gradual shift away from the greenback, have been visible for some time. According to data from the International Monetary Fund (IMF), the share of the US dollar in global foreign exchange reserves fell to an over-30-year low of 58.5% in 2024. In 1999, this number stood at 71%.
“Meaningful de-dollarisation would have profound implications for the global security architecture, reducing the United States’ capacity to fund its military and impose coercive economic pressure,” Ali Ahmadi, Director of Geoeconomics & Sanctions, ReshapeRisk and Executive-in-Residence Fellow at the Geneva Centre for Security Policy, said last year.
For the foreseeable future, though, the US dollar remains by far the most dominant currency, with 89% of total turnover of over-the-counter foreign exchange instruments denominated in US dollars. But if the Trump administration and the President himself continue in the same vein, more meaningful change could become evident.
De-dollarisation can shift the balance of power away from the US and weaken its ability to shape the world economy and global financial markets in its image. (Pixabay) 
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