Monticello
Strong central bank purchases of gold since 2009 and rising gold prices have increased the precious metal’s share of global foreign exchange reserves, negatively impacting fiat currencies. Gold is expected to surpass the euro by the end of 2023, becoming the next The fiat currency to challenge is the US Dollar.
A financial analyst Draw a chart Regarding international reserve allocation, the focus is on foreign currencies (excluding gold) and begins in 1999 with the introduction of the euro.
Looking at these charts, the dollar’s share of total reserves appears to be gradually declining from a peak of 72% in 2001 to 58% by 2023. Also, there does not appear to be any specific currency competing with the dollar.
Figure 1. A typical graph of world foreign exchange reserves.
But what about looking back at the past, including gold? Wherever possible, we combine multiple sources to provide a complete picture of the prevalence of reserve currency (both fiat and gold) from 1899 to 1935, and from 1950 onwards.
Figure 2. World foreign exchange reserves from 1899 to 2023. Data prior to 1950 are estimates. Special Drawing Rights are excluded. Unrelated In the bigger scheme of things.
This paints a completely different story. Rather than showing the slow demise of the dollar, it reveals the historical balance between gold and fiat currencies. It is gold, not dollars, that usually underpins the international monetary system.
Gold once made up the majority of international reserves, even when the pound was the world’s reserve currency before the dollar. On a chart covering only gold and the dollar over a longer period of time, the dollar’s dominance becomes even more relative.
Figure 3. Share of gold and dollars in world international reserves since 1880.
The graph above shows that by 2023, the dollar’s share of total reserves falls to 48%. Declining trust Concerns about asset bubbles, escalating wars, and fears of inflation have caused the price of “fiduciary assets” (fiat currencies) to fall, while gold has been on the rise.
Based on my personal calculations of official gold reserves: Secret AcquisitionFor example, according to the Chinese central bank, gold’s share of total reserves is expected to reach 18% in 2023, up from 11% in 2008.
Gold is currently outperforming the stagnant euro at 16% and with the problems plaguing fiat currencies not going away anytime soon, it could overtake the dollar over the next decade.
Don’t miss the X post below, which includes a video with a bar graph of reserve assets since 1950!
click here To watch videos on X.
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Editor’s Note: The summary bullet points for this article were selected by Seeking Alpha editors.
