Sinking Dollar Floats Gold Higher

Not since the end of the gold standard in 1973, when President Richard Nixon delinked the dollar from the price of gold, has the U.S. currency fallen so rapidly, plummeting 10 percent during the first half of 2025 as measured by the ICE Dollar Index that weighs the greenback’s value against a basket of major foreign currencies. The dollar’s decline has been bullish for gold, given their inverse relationship. This is because most global markets price gold in dollars. As a result, holders of foreign currencies that rise against the dollar have more buying power: it takes fewer yuan or rupees to purchase an ounce of gold. And gold’s biggest markets, by far, are in China and India where the precious metal is revered.

Pressuring the dollar are Washington’s tariff proposals and concerns that the “Big Beautiful” tax and spending bill will expand U.S. government debt by trillions, forcing the government to keep printing dollars to pay off the debt.

“The precious metal’s safe haven appeal is being boosted by concerns over the U.S. fiscal outlook and ongoing tariff-related uncertainty,” market analyst Ricardo Evangelista of brokerage firm ActivTrades told CNBC. 

At the same time, China, Russia, and Turkey, as well as smaller nations,  are aggressively de-dollarizing, reducing their dependency on the U.S. currency as they accumulate gold, a trend that could spread if the U.S. debt load keeps growing.

“Full-scale de-dollarization, if it ever comes, is still a long way away, but there is one dynamic playing out that could significantly raise that risk: increasing government debt,” warns Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock.