Washington.Media - Central Banks Accelerate Dollar Exodus Towards Gold, Yuan, and Euro Amid Trump Trade Turmoil

Introduction

In a bold maneuver, central banks are quickly shifting their focus away from the dollar and turning towards gold, the yuan, and the euro.

This strategic pivot comes amidst the ongoing trade upheaval stemming from Trump's policies, prompting a significant re-evaluation of assets.

As global economic dynamics evolve, the great dollar exodus highlights a transformative moment in the financial landscape, inviting curiosity and speculation about what lies ahead.

Central banks worldwide are orchestrating an unprecedented shift away from U.S. dollar reserves toward gold and alternative currencies, driven by the economic uncertainty and market volatility unleashed by President Trump’s aggressive trade policies in 2025.

This historic reallocation represents the most significant challenge to dollar dominance since the Bretton Woods era, with geopolitical tensions and Trump’s “Liberation Day” tariffs serving as primary catalysts for reserve diversification.

Survey Data Reveals Historic Transformation

The World Gold Council’s 2025 Central Bank Gold Reserves survey, conducted between February and May with a record 73 participating central banks, reveals the scope of this monetary revolution.

An overwhelming 95% of respondents expect global central bank gold reserves to increase over the next 12 months, representing a dramatic surge from 81% in the previous year’s survey.

Even more striking, a record 43% of central banks plan to increase their own gold holdings within the next year, compared to just 29% in 2024.

The Official Monetary and Financial Institutions Forum (OMFIF) survey, covering 75 central banks managing $5 trillion in reserves, found that one-third plan to increase gold exposure over the next two years—the highest level in at least five years.

These findings underscore central banks’ growing conviction that gold serves as a critical hedge against the economic and political uncertainties emanating from U.S. trade policy.

Trump’s Liberation Day Tariffs Trigger Market Chaos

President Trump’s April 2, 2025 “Liberation Day” announcement fundamentally altered global trade dynamics and central bank reserve strategies.

The sweeping tariff package imposed a baseline 10% duty on imports from nearly all countries, with much higher rates targeting major trading partners—including 54% on Chinese goods and 20% on European Union products.

The announcement triggered what became known as the 2025 stock market crash, with global markets experiencing their worst decline since the COVID-19 pandemic.

The tariff announcement created immediate market turmoil, with gold prices surging to record highs above $3,000 per ounce as investors fled to safe-haven assets.

Goldman Sachs raised its end-2025 gold price forecast to $3,300 per ounce, citing stronger-than-expected safe-haven demand driven by trade uncertainty.

Bank of America analysts project gold could reach $3,500 per ounce over the next 18 months, with the recent surge “almost exclusively driven” by tariff-related fears.

Dollar’s Declining Reserve Status

The dollar’s share of global foreign exchange reserves has steadily eroded, falling from 72% in 2002 to 57.8% at the end of 2024.

This gradual decline has accelerated under Trump’s trade policies, with 73% of central banks in the World Gold Council survey expecting moderate or significant reductions in dollar holdings over the next five years.

The OMFIF survey found an even more dramatic shift, with 70% of respondents saying the current U.S. political environment was deterring dollar investment—more than double the proportion from the previous year.

Czech National Bank board member Jan Kubicek warned that the dollar’s global reserve share could fall below 50% within the next decade, potentially dropping to approximately 47% as other currencies gain prominence.

This would mark a historic threshold, representing the first time since World War II that the dollar would not command a majority share of global reserves.

Gold Emerges as Premier Alternative

Gold has already surpassed the euro to become the second-largest reserve asset globally, comprising approximately 20% of official reserves compared to the euro’s 16%.

Central banks have purchased over 1,000 tonnes of gold annually for three consecutive years—more than double the 400-500 tonne average of the previous decade.

Global central bank gold holdings now total 36,000 tonnes, approaching the historic peak of 38,000 tonnes reached during the Bretton Woods era.

China’s central bank exemplifies this trend, adding gold to its reserves for the seventh consecutive month in May 2025, increasing holdings by 60,000 troy ounces to reach 73.83 million troy ounces total.

This steady accumulation by the world’s second-largest economy signals sustained institutional demand even as gold prices reach all-time highs.

Currency Diversification Accelerates

Beyond gold, central banks are increasingly favoring the euro and Chinese yuan as dollar alternatives.

The OMFIF survey found that a net 16% of central banks plan to increase euro holdings over the next 12-24 months, up from 7% previously, making it the most in-demand currency.

Looking ahead to the next decade, 30% of central banks anticipate increasing yuan holdings, potentially tripling its share of global reserves to 6%.

Three sources familiar with reserve management told Reuters that the euro could regain the reserve share lost during the 2011 eurozone debt crisis by decade’s end, potentially recovering to approximately 25% of currency reserves from the current 20%.

This would represent a significant milestone in the eurozone’s recovery from its sovereign debt crisis.

Geopolitical Drivers and Economic Implications

Central bank officials cited inflation concerns and geopolitical risk as primary motivations for gold purchases, with emerging market institutions leading the diversification trend.

One anonymous central bank told the World Gold Council that “the uncertainty stemming from the tariffs implemented and committed by the USA regarding trade policies in the recent period may reduce the interest in USD and USD-denominated assets as a reserve currency”.

The trend reflects broader concerns about the weaponization of the dollar following sanctions related to the Russia-Ukraine conflict and growing uncertainty about U.S. policy predictability.

Max Castelli, who leads sovereign markets at UBS Asset Management, noted that reserve managers have been questioning the dollar’s safe-haven status post-tariff—a question “never posed before, not even during the 2008 financial crisis”.

Long-term Structural Implications

This monetary realignment carries profound implications for global financial stability and U.S. economic influence.

The benefits of reserve currency status have historically allowed the United States to finance deficits at favorable rates through foreign recycling of dollars into Treasury securities.

A sustained decline in dollar dominance could significantly limit America’s ability to service large deficits cheaply, fundamentally altering the global financial architecture.

The current shift represents more than cyclical volatility—it signals a structural transformation in how central banks view reserve allocation amid an increasingly multipolar world.

With 95% of central banks expecting continued gold accumulation and nearly three-quarters anticipating dollar share declines, the monetary order established after World War II faces its most serious challenge in decades.

The acceleration of this trend under Trump’s trade policies suggests that protectionist measures intended to strengthen American economic sovereignty may paradoxically undermine one of the United States’ greatest strategic advantages: the dollar’s global reserve currency status.

As central banks continue their historic flight from dollar assets toward gold and alternative currencies, the foundation of American financial hegemony faces an uncertain future.