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.”

In her recent budget speech, Namibia’s Finance Minister, Ericah Shafudah, emphasized the urgent need for economic diversification as the country faces continued challenges in its diamond sector. She forecasted only 4.5% growth for 2025, a downward revision from the previously projected 5.4%. The diamond industry, which contributes about 10% of Namibia’s GDP, has been facing several headwinds, including weak global demand, particularly from key markets like China and the US, increased competition from Angola’s cheap rough supply, and the growing popularity of lab-grown diamonds.

The slump in the diamond sector has had a significant impact on domestic activities, with total revenue from diamonds halving in 2024. Debmarine Namibia, the joint venture between De Beers and the Namibian government, reported a 38% decline in its revenue last year. This decline has been reflected in the country’s tax revenues, with Namibia’s Revenue Agency (NamRA) forecasting a reduction of NAD 6 billion (approximately USD 330 million) for 2025.

Minister Shafudah’s speech highlighted the urgent need for diversification, with Namibia possessing exceptional solar energy potential, along with opportunities for growth in tourism, agriculture, and manufacturing. By focusing on these sectors, Namibia aims to reduce its reliance on diamonds and build a more resilient economy capable of withstanding fluctuations in global commodity markets.

Gold prices maintained their upward momentum on Wednesday, fueled by a combination of rising geopolitical tensions, concerns over the US economy, and the looming threat of tariffs from US President Donald Trump. These factors drove both domestic and international gold prices higher, as investors flocked to the precious metal as a safe-haven asset. The MCX gold contract for June 2025 opened with a significant gap-up at ₹91,229 per 10 grams, hitting an intraday high of ₹91,232, reflecting strong market reactions to Trump’s tariff threats.

In global markets, spot gold hovered around $3,125 per ounce, while COMEX gold futures stood at $3,155 per troy ounce. As Trump’s tariff announcements draw closer, gold prices found fresh demand near $3,110, with investors seeking a safe store of value amid the uncertainty surrounding global trade policies. The anticipation of tariffs led to renewed interest in gold, reinforcing its status as a hedge against geopolitical and economic risks.

The daily Relative Strength Index (RSI) has now entered the overbought zone, signaling that the current gold rally may need to be approached with caution. While the price surge reflects the broader market uncertainty, the overbought condition suggests the potential for a price correction in the near term. Despite this, gold’s appeal remains strong, particularly with the softening signs of the US labor market and growing expectations of interest rate cuts by the Federal Reserve, which could further support gold’s upward momentum.

However, any short-term reactions to US economic data or Fed actions may be short-lived, with the market’s primary focus on Trump’s upcoming “Liberation Day” and the announcement of new tariffs. The outcome of these geopolitical developments will play a crucial role in determining gold’s trajectory in the coming weeks. As tensions continue to build, gold remains a key asset in navigating the uncertainty surrounding global financial markets, with traders and investors closely monitoring every new development.