Dollar Declines as Gold Gains Global Trust

By Doug Young – 19 September 2025

Introduction

On September 17, 2025, the U.S. Federal Reserve cut its benchmark interest rate by a quarter-point for the first time this year, lowering the federal funds rate target to between 4% and 4.25%.

While this move may appear routine at first glance, it signals much deeper shifts unfolding within the global monetary system.

The dollar’s dominance as the world’s primary reserve currency is increasingly being questioned, while gold is gaining renewed status as a trusted, neutral store of value amid geopolitical uncertainties and monetary policy challenges.

Political Influence on the Federal Reserve and Dollar Trust

The September rate cut broke a long period of steady monetary tightening aimed at controlling inflation. Many observers note that political pressure has increasingly influenced the Fed’s decisions, raising questions about central bank independence—a cornerstone of monetary credibility.

President Donald Trump’s public calls for rate cuts and appointments to the Fed’s board have coincided with this shift, signaling a politicization of U.S. monetary policy.

Markets reacted with volatility: stocks showed subdued gains, bond yields fluctuated around key psychological levels, and the dollar weakened against major currencies.

The erosion of trust in the dollar reflects not only economic fundamentals but also these growing political concerns that undermine the perception of the Fed as an impartial guardian of monetary stability.

Central Banks Diversifying Reserves Away from the Dollar

In response to the dollar’s perceived vulnerabilities, central banks around the world have accelerated diversification of their foreign exchange reserves.

Strategic geopolitical events, such as sanctions imposed on Russia and tensions involving major powers, have underscored the risks of holding large reserves denominated in a currency subject to political restrictions.

Emerging economies like China and India have notably increased their gold holdings as part of official reserves to hedge against currency and geopolitical risks.

This trend signals a gradual but deliberate move away from the dollar-centered reserve system toward a more multipolar arrangement where gold serves as a reliable, non-sovereign store of value.

Gold’s Price Behavior and Monetary Trust

Contrary to traditional economic models, gold’s price has risen in 2025 despite elevated real interest rates that typically depress non-yielding assets.

This anomalous performance suggests that investors are viewing gold less as an inflation hedge and more as a trust barometer amid monetary uncertainty.

Recent gold prices have breached the $3,600-per-ounce mark, reaching new record highs. Several leading financial institutions, including J.P. Morgan, project continued upward pressure on gold prices into 2026 due to persistent fiscal deficits, geopolitical risks, and declining confidence in sovereign debt.

Bond yields, while still significant, have become less of a reliable indicator as gold’s value increasingly reflects a skepticism of fiat currencies and government promises.

Physical Demand, Geopolitics, and Commodities Pricing

Physical gold demand has surged globally, with not only retail investors but also official sectors boosting purchases. This change reflects a preference for tangible assets that cannot be frozen, confiscated, or devalued through political fiat.

Furthermore, the pricing of critical commodities is gradually shifting away from the dollar as the sole reference currency. Proposals to denominate energy supplies, for example, in units anchored to gold rather than dollars illustrate this dynamic.

Silver, though more volatile, is expected to follow gold’s trajectory, driven by similar monetary distrust.

Educational Perspective on Monetary and Fiscal Risks

In this evolving monetary landscape, gold emerges as a monetary safe haven amid mounting fiscal and monetary uncertainties. Fiat currencies and sovereign bonds face credibility challenges as inflationary pressures, budget deficits, and political risks accumulate.

This structural shift heralds the rise of a multipolar monetary system in which gold’s status as a neutral, non-sovereign asset distinguishes it. Importantly, this discussion provides an educational perspective on global monetary risks without serving as financial or investment advice.

Economic and Fiscal Backdrop

The United States continues to grapple with expanding fiscal deficits and mounting debt, which markets view with increasing caution.

At the same time, major corporations have deleveraged and improved balance sheets, contrasting with government borrowing trends that erode overall trust in sovereign creditworthiness.

These fiscal imbalances contribute significantly to the erosion of confidence in the dollar and the search for alternative stores of value and reserve currencies.

Conclusion

The Federal Reserve’s recent rate cut occurs within a broader context of declining trust in the U.S. dollar and the ascendancy of gold as a global monetary anchor.

The evolving geopolitical environment, fiscal challenges, and changing central bank policies collectively drive this monetary transition.

While the dollar remains a dominant currency, the financial landscape is clearly shifting toward greater diversification and reliance on tangible assets like gold.

Staying informed about these developments is essential in understanding the evolving global monetary system.

Discover Why Savvy Retirees are Diversifying With Gold