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Gold, ‘Non-traditional reserve currencies’ eat into U.S. dollar’s reserve dominance: Wolf Richter

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Gold and other reserve currencies – but not the euro or renminbi – are steadily eroding the U.S. dollar’s position as the world’s preeminent reserve asset, according to Wolf Richter, analyst and publisher of Wolf Street.

“The status of the US dollar as the dominant global reserve currency has helped the US fund its twin deficits, and thereby has enabled them: the huge fiscal deficit every year and the massive trade deficit every year,” Richter wrote in an article published Monday. “The reserve currency status comes from other central banks (not the Fed) having purchased trillions of USD-denominated assets such as Treasury securities, other government securities, corporate bonds, and even stocks. The dollar status as the dominant reserve currency has been crucial for the US, and as that dominance declines ever so slowly, risks pile up ever so slowly.”

Total holdings of USD-denominated securities by other central banks (not the Fed) fell by $59 billion to $6.63 trillion at the end of 2024, from $6.69 trillion at the end of 2023,” he noted. “And the dollar’s share declined to 57.8% of total allocated exchange reserves at the end of 2024, the lowest since 1994, down by 7.3 percentage points in 10 years, as central banks have been diversifying their holdings for years to assets denominated in currencies other than the dollar, and into gold.”

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Democrats Win In Midterm Polls Could Significantly Lift Industrial Demand For Silver

World Gold Council Data Going Back To 1970 Show Gold Rising 62% Of The Time In The Six Months After A Midterm, With A Median Gain Of Just 2%,

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·  Midterm Election Snapshot: Americans are voting for 435 House seats, 35 Senate seats, and 36 governorships. Forecasters expect Democrats to win the House (~90% chance), while the Senate remains a toss-up driven by voter concerns over inflation, tariffs, and the Iran conflict.

·  Government Gridlock: A Democratic House would constrain President Trump’s agenda, leading to potential gridlock over spending and taxes.

·  Impact on Precious Metals: Election outcomes matter to gold and silver mainly through their impact on Treasury yields and the US dollar. Silver enters the vote under weaker pressure, while gold holds up better.

·  Historical Pattern: Since 1970, gold rises 62% of the time in the 6 months following a midterm, with a median gain of 2%—though past patterns are not guaranteed to repeat in 2026.

·  National Debt Factor: A full Democratic sweep (“blue sweep”) could focus trader attention on the $40.5 trillion national debt ($120,000 per US citizen), which could eventually boost investment demand for both metals.

·  War & Geopolitics: Funding for the 250+ day conflict with Iran would face heavy resistance in a Democratic Congress. An earlier end to the conflict would help gold and silver regain their traditional safe-haven status.

·  Industrial Boost for Silver: Democratic policies prioritizing social infrastructure and green energy legislation would significantly lift industrial demand for physical silver, potentially aiding its effort to break back above the historic $50 mark.

·  Interest Rate Risks: Higher federal spending could widen deficits and weaken the dollar (bullish for metals), but higher real interest rates and elevated Treasury yields could weigh on gold more than silver.

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