Gold prices are hovering around the $4,500 level, and Deutsche Bank predicts the XAU/USD index could breach $8,000 over de-dollarization. The bank wrote in a note to clients that emerging economies are increasingly diversifying their central bank reserves by sidelining the US dollar by procuring gold. This is a cause of concern as the trend is growing and could change the global financial landscape.
Deutsche Bank added that developing countries added over 225 million troy ounces of gold since 2008, highlighting that de-dollarization will push the XAU/USD prices up in the charts. Countries such as China, Russia, India, Poland, and Turkey remain the biggest buyers of gold. This adds a layer of financial safety net to protect their economies from being vulnerable to sanctions.
In addition, Saudi Arabia, Qatar, the United Arab Emirates, Egypt, and Kazakhstan are not too far behind in accumulation. Countries in Eastern Europe and the Middle East are significantly increasing their gold reserves as de-dollarization expands, Deutsche Bank emphasized. The accumulation rose dramatically after the US imposed sanctions on Russia in February 2022 for invading Ukraine.
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Deutsche Bank Predicts Gold Price Above $8,000 Over De-Dollarization
Developing countries are now buying more gold than the Western bloc combined. The rising allocation of the precious metal is making de-dollarization advance at a rapid pace. In the next five years, the allocation would increase further, leading to a strain on the US dollar’s prospects. Even the US economy could be affected if the dollar’s role in the central bank is reduced.
The future of de-dollarization will depend on how high the gold spending would reach, wrote Deutsche Bank. If central banks begin to target 40% of their reserves in gold, then the US dollar would fall on the path of decline. There is growing mistrust of the US dollar lately due to Trump’s previous trade wars and tariffs. Add to that the imposing of sanctions was already a concern for developing nations.