“America First” Could Result in “Gold First”

President Trump’s dedication to “America First” policies may benefit gold by accelerating the global trend towards de-dollarization. The concern in international capitals is that a Trump Administration may intensify Washington’s weaponization of the dollar to try to force countries to adhere to policies that align with U.S. interests.

This is the approach that the Biden Administration used in attempting to punish Russia for its invasion of Ukraine. Russian banks were banned from SWIFT, the international payments system that oversees cross-border payments between financial institutions. But Russia cobbled together an alternative trade and payments system with its allies, allowing the country to largely bypass the dollar. Russia has also relied heavily on its large gold reserves to bolster its finances.

Witnessing Washington’s use of the dollar as a policy weapon, central banks, including those in China, Turkey, Hungary and India, have aggressively purchased gold for their nation’s financial reserves, trusting that wealth in gold can prevent their countries from being subjected to U.S. dollar-related pressure tactics to influence trade or foreign policy agendas.

Moreover, foreign governments are also thinking of potential alternatives to dollar-based payments systems. Writing in the Financial Times, respected financial expert Mohammed El-Erian, President of Queens College, Cambridge and former chief executive officer of PIMCO, argues this is the result of a “loss in confidence in America’s management of the global order” and “its reduced interest in the rule-based, co-operative multilateral system” that has dominated international finance.

For decades, the U.S. dollar has served as the basis of the global financial system. But, with the U.S. turning inward under new leadership and major foreign capitals attempting to turn their backs on the dollar, gold will likely be seen as the world’s most trusted reserve, and, in some countries, the basis for stable financial systems.