🪙🌐 From Dollars to Gold: How Sanctions, Tariffs & Geopolitics Are Reshaping Global Finance

📉 The Slow Erosion of Dollar Dominance

The US dollar still accounts for the lion’s share of global reserves and trade invoicing. According to the ECB, it represented 57.8% of global reserves at the end of 2024, far ahead of any competitor. Yet this is down by more than 2 percentage points from the previous year and over 11 percentage points compared with the early 2010s.

The IMF’s trade invoicing study confirms this trend: while the dollar continues to dominate trade invoicing worldwide, its role is increasingly linked to geopolitical alignment. Since Russia’s invasion of Ukraine in 2022, countries closer to the US have deepened their dollar use, while those distancing themselves have sought alternatives.

The underlying driver is not economics alone, but trust. When the US and its allies froze Russia’s central bank reserves in 2022, it demonstrated the vulnerability of holding assets in dollars or euros. For many emerging economies, this was a turning point: reliance on the dollar carries potential political costs.

🇪🇺 The Euro: Stable but Constrained

The euro remains the world’s second most important currency. Its share in global reserves stood at around 20% in 2024, broadly stable since the Ukraine war began. It is also widely used in trade invoicing, particularly in Europe, Africa, and parts of the Middle East.

However, the euro’s role is shaped by both strengths and weaknesses. On the positive side, euro-denominated bond issuance surged in 2024, with “reverse Yankee” bonds (US firms borrowing in euros) hitting record highs. The ECB also highlights the resilience of foreign holdings of euro-denominated debt, even among non-aligned economies.

On the other hand, structural issues continue to limit the euro’s reach. Fragmented capital markets, incomplete fiscal integration, and the absence of a fully developed “safe asset” comparable to US Treasuries all constrain the euro’s potential. Christine Lagarde herself emphasizes the need for progress on European financial integration, defense financing, and the digital euro to boost its international standing.

🇨🇳 The Rise of the Renminbi

The RMB still represents only a small fraction of reserves — about 2.2% in 2024, down from a 2022 peak of 2.6%. Yet, its importance in trade and payments is growing fast.

The IMF dataset shows that RMB invoicing, initially concentrated in Asia, has expanded to Europe and Latin America. China’s Cross-Border Interbank Payment System (CIPS) processed nearly USD 6 trillion in Q4 2024, up 22% from the previous year. This reflects Beijing’s deliberate strategy: offering RMB settlement to sanction-hit partners (Russia, Iran) and promoting the RMB through initiatives such as the Belt and Road.

Geopolitical alignment plays a central role. The IMF finds that since 2021, trade invoicing patterns increasingly correlate with political distance. Countries aligned with China invoice more in RMB, while those aligned with the US gravitate toward the dollar. The world is not de-dollarizing uniformly; it is polarizing.

🪙 Gold: The Neutral Reserve Asset

Perhaps the most striking development of 2024 was the resurgence of gold. Central banks purchased over 1,000 tonnes, double the annual average of the previous decade. Gold’s share of global reserves surged to 20% — surpassing the euro’s 16%.

Why gold? In a world of sanctions, tariffs, and digital surveillance, gold remains neutral, tangible, and sanction-proof. Surveys show that two-thirds of central banks hold gold for diversification, while 40% view it as protection against geopolitical risk.

Notably, countries most distant from the West — including Türkiye, India, and China — led the buying spree, together accumulating more than 600 tonnes since 2021.

We are back near Bretton Woods-era levels, when gold anchored the international monetary system. This shift highlights a growing search for assets beyond the reach of Western sanctions.

⚔️ Geopolitics, Sanctions, and Trade Wars

The real story underlying these currency shifts is geopolitics.

• Sanctions on Russia after 2022 made it clear that dollar and euro reserves could be frozen, driving Moscow and its allies toward RMB and gold.
• Tariffs on China, especially escalated under the Trump administration’s second term in 2025, reinforced Beijing’s push to reduce dependence on Western currencies.
• The BRICS+ summit in 2024 openly discussed creating new payment infrastructures, such as “BRICS Clear,” to bypass the dollar-dominated system.

Both the IMF and ECB agree: currency choice is increasingly politicized. Trade invoicing, reserve management, and payment systems are no longer just about efficiency — they are about alignment, sovereignty, and security.

📌 The Emerging Multi-Currency World

What do these developments mean for the future of the global monetary system?

• The US dollar remains dominant but is less absolute than before. Its share of reserves has slipped below 58%, its lowest in decades.
• The euro is holding steady at ~20% but risks being overshadowed if European integration falters.
• The RMB remains modest at 2.2% of reserves, but its role in trade and payments is expanding rapidly, driven by geopolitical and economic ties.
• Gold has reemerged as a parallel anchor, now representing a larger share of reserves than the euro.

In short: the “one-currency world” of the post-Cold War era is fading. A more fragmented, multi-currency order is taking shape — shaped as much by geopolitical fault lines as by economics.

🧭 Conclusion: Finance in an Age of Fragmentation

The combined insights from the IMF and ECB underscore a critical point: trust and geopolitics are reshaping money. The freezing of reserves, the weaponization of payments, and the rise of alternative systems are accelerating change.

For policymakers, this means preparing for a world where currencies compete and coexist, rather than one dominated by a single hegemon. For businesses, it means navigating new complexities in trade, payments, and hedging. And for investors, it highlights the growing appeal of assets — like gold — that stand outside the political reach of any one power.

The future of global finance will not be defined by the fall of the dollar overnight. Rather, it will be shaped by a gradual but persistent fragmentation into a multi-polar monetary system.

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