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Investing.com -- Gold’s rally to $4,000 is a question of “when,” not “if,” according to Yardeni Research, as mounting central bank demand and eroding confidence in the U.S. dollar drive the metal’s ascent.
Unlike past gold surges tied to inflationary spirals, the current bull run is rooted in geopolitics and reserve diversification.
A broad group of nations—including China, India, Turkey, and Gulf states—has been accelerating gold purchases in response to what they view as an increasingly politicized dollar.
The movement gained momentum after the U.S. froze Russia’s foreign reserves in 2022, setting off a wider trend toward de-dollarization.
“President Trump has contributed to the move with his debt-defying fiscal policy and attacks on the Fed’s independence,” Yardeni Research added in a Wednesday note.
Gold accumulation by central banks such as the People’s Bank of China (PBOC) illustrates the urgency to reduce reliance on the greenback.
The PBOC has increased its gold holdings for seven consecutive months, even as prices climbed 27% this year. Beijing’s share of gold reserves remains low relative to peers, implying scope for continued accumulation.
The BRICS and BRICS+ blocs are also intensifying efforts to build a dollar alternative. Collectively, they hold 42% of global central bank reserves, yet gold represents just 10% of their total, leaving room for further buying.
“Saudi Arabia is considering joining BRICS+,” Yardeni notes, and could shift oil pricing to the Chinese yuan, potentially undermining the longstanding petrodollar framework.
Political and fiscal pressures in the U.S. are further contributing to the gold bid. Trump’s attacks on the Federal Reserve and ballooning debt levels are stoking concerns among global reserve managers.
While the dollar still dominates at 58% of global reserves, Yardeni suggests the U.S. should tread carefully. “Were Trump to try to fire Powell, he might hasten gold’s surge,” it warns.
But the strong demand for the yellow metal isn’t limited to central banks. Yardeni highlights comments by UBS’s Joni Teves, who said that “persistent uncertainty boosts the need to diversify portfolios, benefiting gold.”
“Yet if monetary authorities continue to clamor for gold, future economists may look back on the “exorbitant privilege” that Washington derives from the dollar’s dominance as a “barbarous relic” of its own,” Yardeni continued.