Dollar Crash Sparks Global Trust Crisis

The American dollar has lost 10.41 % of its value over this year. A significant drop for the world’s main reserve currency, amidst economic tensions and loss of confidence. Meanwhile, gold and silver have seen spectacular rises, becoming safe haven assets again. This movement reflects a shift in market balance, where the role of the dollar as a safe haven is increasingly challenged.

The dollar drop : a year under high tension

The American dollar, long considered the ultimate safe haven, has lost 10.41 % of its value since the beginning of the year, while many observers believe that the dollar’s hegemony is coming to an end.

This decline, measured by the DXY index, reflects a depreciation against a basket of major currencies, including the euro, yen, and pound sterling. In a context of global economic uncertainties, this spectacular drop contrasts with the historically defensive role of the greenback. Meanwhile, two traditional safe haven assets have surged.

Here are the key figures :

This dual dynamic, dollar collapse and precious metals surge, has not gone unnoticed among economic analysts. Among them, Tyler Cowen, economist and professor, highlights in an opinion piece that this rush to precious metals is an “immediate warning signal for the economy”.

“The rush to precious metals should worry us all. It reflects a new, potentially disastrous danger on the horizon“, he warns. For Cowen, investors are no longer just seeking performance. They are fleeing growing instability and looking to protect themselves.

A crisis of confidence and the wavering role of the dollar as a safe haven asset

According to Cowen, the dollar’s drop cannot be understood without taking into account the loss of institutional credibility of the United States. He states that it is not only economic fundamentals that are problematic, but also the political unpredictability surrounding US governance.

“If the US government and policies themselves are a source of instability, and the economy is volatile, then you’ll look for other protections“, he writes. He adds that “the chaos in the United States, especially at the White House, pushes investors to find alternatives to the dollar“.

Cowen also emphasizes a major structural point: the global economy is becoming more correlated, which means there are now fewer sources of diversification for investors in case of crisis.

Previously, the dollar played a counter-cyclical role, able to withstand global shocks. Today, this function seems to be shifting to precious metals. “Precious metals take on the protection and hedging role that the dollar once fulfilled“, he states, implying that the hegemony of the greenback as a safe haven asset may be eroding.

In this context of global adjustment, the BRICS strengthen their position by promoting alternatives to the dollar, thus increasing the fragmentation of the international monetary system.

Putin has formalized the dollar’s decline in Sino-Russian trade, marking a strategic turning point. This move therefore illustrates the greenback’s retreat on the international stage.