The global dominance of the dollar is in danger. Central banks of different countries have started depositing gold. As a result, the value of the US dollar has declined sharply against gold. Significantly, until ten years ago, the trend was to accumulate more and more dollars in its foreign exchange reserves.
This news is worrying for America that the central banks of countries around the world are increasing the amount of gold in their reserves. As a result of the increased urge to deposit gold, the US dollar has declined sharply in comparison to gold. It is worth noting the fact that till ten years ago the trend was to accumulate more and more dollars in its foreign exchange reserves. Then gold was mainly bought by the central banks of Russia and some such countries, which wanted to reduce their dependence on the dollar due to conflict with America. But now this has reversed. Now gold is being bought because various countries want to protect themselves from possible volatility in the money market. Money market experts have pointed out that central banks started increasing their gold reserves in 2009. Due to the economic recession of 2008, the thinking of central banks changed. This recession started in America itself. Meanwhile, keeping the dollar in the foreign exchange reserves has become a loss deal in comparison to gold.
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The currency-to-currency ratio of the dollar fell to a 25-year low in 2020. Until 1971, the monetary system of the world operated on the gold standard. But then US President Richard Nixon ended the dollar’s relationship with gold. But its effect was that the availability of dollars in the world money market started increasing rapidly. When this availability increased significantly, then its price started decreasing. Today, the dollar has fallen by only 20 percent compared to 1971. That is why this currency is no longer as attractive to central banks as before. So the focus of the central banks is again on gold. In 2021, the amount of gold held by him reached a 31-year high. According to the World Gold Council, central banks of various countries deposited 4,500 tonnes more gold in their reserves in 2021. Till last September, all central banks had more than 36,000 tonnes of gold. This is the highest volume since 1990. The worrying news for the US is that a major reason for its global dominance is dollar dominance. It seems to be breaking now.