Is the US Dollar in Danger of Collapsing?

In the aftermath of President Trump’s tariffs, financial markets have seen a significant amount of volatility and uncertainty. But while most Americans have focused on the well-being of their 401(k) or investment accounts, there are other tariff impacts that could be more far-ranging.

For decades the US dollar has served as the world’s reserve currency, and Americans have come to take that for granted. But recent events could be signaling that the dollar’s dominance could be coming to an end.

Will the dollar be able to shrug off this latest difficulty, as it was in the aftermath of the collapse of the Bretton Woods system? Or could we be on the cusp of a dollar collapse and the beginning of a new international monetary regime?

Some Key Takeaways

1. President Trump’s tariffs have opened up an era of volatility in financial markets.
2. Adding to the volatility is the fact that bond yields have risen despite a flight to safety.
3. Concerns about a dollar collapse could be one reason behind increased demand for gold.

US Debt as a Safe Haven

One of the benefits of the dollar’s reserve currency status is that US Treasury debt is considered one of the world’s premier safe haven assets. And with nearly $29 trillion of debt held by the public, there is a lot of that debt circulating worldwide.

But what happens if the rest of the world stops buying that debt?

In the aftermath of President Trump’s tariffs, it wasn’t just stock markets that saw major volatility. Bond markets were rocked too, with US treasuries being dumped in an unusual manner.

Normally, when stock markets sustain major losses, you would expect people to move their money into safe haven assets like bonds. But rather than buying bonds, people around the world sold bonds.

When bonds are sold, yields rise, and the yield on 10-year and 30-year Treasuries rose precipitously and has remained there ever since. From a low of 4.01% on April 4th, the 10-year bond yield has risen to 4.29%, while the 30-year bond yield has risen from 4.41% to 4.74%.

Could this bond selloff continue?

The top five holders of US Treasuries are Japan, China, the UK, the Cayman Islands, and Luxembourg, holding a combined $3.5 trillion of Treasuries.

While much has been written about the potential threat of a Chinese selloff of US Treasuries , it’s important to keep in mind that the $784 billion in Treasuries attributed to China may not be the entirety of Chinese Treasury holdings.

The way Treasury major foreign holders (MFH) data is tabulated, Treasuries are credited to the domicile of the bank holding them, not to the domicile of the Treasury holder. So if a Chinese institution owned Treasuries and held them at a bank in the Cayman Islands, that would be counted as a Cayman Islands holding, not a Chinese holding.

Because of this, the MFH data may not fully express the full extent of Chinese ownership of US Treasuries, and the threat of a US Treasury selloff may even be underestimated.

Could a US-China Trade War Destroy the Dollar?

An additional wrinkle that presents itself when discussing the potential for a US-China trade war is the role that gold might play. China continues to add gold to its holdings, as it has for years.

But it isn’t alone, as people all over the world are adding gold to their holdings, helping drive the gold price to record highs recently. With demand for safe haven assets rising now, the fact that the gold price is rising at the same time as Treasury bond prices are falling is ominous.

It’s obviously too short of a timeframe to make a definitive claim, but could this be the beginning of the dollar’s demise? Could the safe haven status of US Treasuries be deteriorating at the same time as gold’s safe haven status is climbing?

If this trend continues, if gold prices continue to rise and bond prices fall as bond yields rise, it could be a worrying sign about the dollar’s future. But decades of dominance isn’t likely to fade away in just a few months.

It could take years of this type of behavior for a dollar collapse to really become evident, but could it be too late by then for anyone to do anything about it?

Help Protect Your Savings With Gold

Human beings have always had a fear of the unknown, and one of the biggest unknowns is what exactly will happen if or when the dollar collapses.

Will stock markets collapse? Will the dollar become even more devalued than it is today? Will dollar-denominated assets lose significant amounts of value?

There’s a lot of speculation out there about what might happen, but no one really wants to find out the hard way what might happen. That’s why more and more people are starting to buy gold, as a hedge and a safe haven against what might happen.

Gold has served as a safe haven asset for centuries, helping to protect against economic turmoil and financial uncertainty. Safe haven buying of gold remains strong today, and is helping push gold’s popularity as the uncertainty of tariff’s effects remains.

If recent events have you worried about what the future may hold, there’s no time like the present to start exploring the possibilities when it comes to buying gold, particularly if you’re worried about your retirement savings.

With a gold IRA, you can make a tax-free rollover of your existing retirement assets from a 401(k), 403(b), TSP, IRA, or similar retirement account into a gold IRA. That allows you to use your retirement savings to purchase physical gold coins or gold bars and still enjoy the same tax advantages as any other IRA account.

Goldco has helped thousands of customers benefit from adding gold to their gold IRA accounts, and with over $3 billion in precious metals placements and over 6,000 5-star reviews from our customers, we’ve worked hard to become one of the best gold companies in the country.

If you’re worried about the future of the dollar, don’t wait for a possible collapse before trying to help safeguard your savings. Call Goldco today to learn more about how gold can play a role in helping defend you against a declining dollar.