Gold's rise and the dollar slump may be entwined with BRICS nations which have been increasingly discussing and implementing policies aimed at reducing their reliance on the U.S. dollar in international trade and finance
Friday, August 29, 2025
By Jeremy Boulton
Gold's rise and the dollar slump may be entwined with BRICS nations which have been increasingly discussing and implementing policies aimed at reducing their reliance on the U.S. dollar in international trade and finance.
Being large consumers or producers of gold, Brazil, Russia, China, India and South Africa have a vested interest in the precious metal, which has soared in value.
China has been actively and consistently increasing its gold reserves, making it a notable trend among major economies and especially within the BRICS group. Russia has been building its gold reserves significantly over the past decade and India has been actively building its gold reserves in recent years.
Gold is seen as a "sanctions-proof" asset that can be used even if access to dollars or euros is restricted.
The simultaneous decline in the dollar's value during a period where it would usually rise seems to go hand in glove with gold's surge, and may be more than speculation.
Instead of benefiting from risk aversion stemming from the trade war - thanks to its status as the global reserve currency - the dollar has instead suffered greatly, and this has fuelled doubt about a previously steadfast safe asset, which is spurring more speculation about its decline.
There is a strong correlation between gold, which has more than doubled in value since September 2022, and the dollar. The beginning of the gold rally coincided with a dollar slump that immediately followed intervention by Japan's central bank to curb its rise versus the yen.
Gold's rise has certainly had roots outside of speculation this year. Despite heavy selling by specs after February, it rose around $700/oz to a record peak at $3500/oz in April.
It's possible that gold's huge gain is not due to speculation but a shift in perception that is leading investors to seek alternate safe assets.
If the trade war inspires not just the speculation that has given both euro and yen a major boost, but also the will to diversify global FX reserves, then the greenback might fall far.
Gold, which has risen toward its record peak, could be signalling a further drop in dollar's value is imminent.
Jeremy Boulton is a Reuters market analyst. The views expressed are his own.
Reuters