Despite the US dollar dominance sweeping the financial space, the apprehensions surrounding the US economy are compelling nations to take staggering steps.
A new development has been noted where Middle Eastern and African countries have been consistently withdrawing their gold reserves from the US, adding more pressure to the USD’s global prestige.
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Why Are Countries Withdrawing Gold Reserves From The US?
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Several Middle Eastern and African countries, reportedly Nigeria, South Africa, Ghana, Senegal, Cameroon, Algeria, Egypt, and Saudi Arabia, have decided to withdraw their gold reserves from the US.
The move is triggered by the instability encountered in the US financial system, further compounded by eroding USD dynamics.
“These countries aim to insulate themselves from potential financial contagion and secure their wealth within their borders.”
According to several analysts and commentators, countries isolating their holdings from centralized financial hubs like the US portray a stark distinction that the world is slowly inching towards. This implies that nations are interested in exploring alternatives rather than sticking to just one notion.
“Furthermore, this wave of withdrawals underscores a broader trend of geopolitical realignment as nations reassess their financial dependencies. They are doing so to fortify their economic sovereignty. The move is not merely symbolic. It reflects a pragmatic shift in global financial strategy. The countries are now opting to diversify their holdings and mitigate exposure to potential risks emanating from centralized financial hubs.” As shared by Clint Engler, CEO of CERAC Trader Strategy,
The US dollar is currently sitting in a precarious position, with mounting debt metrics gnawing at it. Similarly, the comments of US Chief Economic Advisor Jared Bernstein have further added fuel to the fire, adding to the growing USD woes.
Challenges That the USD Has to Face
With the BRICS alliance exploring options to launch a new currency, the US dollar now has fierce competitors to tackle to keep its prestige intact.
Also Read: Chinese Yuan Threatens To Uproot the US Dollar
Similarly, with Russia and China echoing calls for de-dollarization, the USD is now standing at the edge, dipping sideways.
“Meanwhile, BRICS has led a growing rally around precious metals. Primarily gold as BRICS is looking to use gold to back its underdeveloped currency. It will use it as an alternative to the US Dollar.”