The US dollar has now claimed a major new title, the one that involves the American currency hitting a 20-year low in global reserves. This position has now been handed over to gold, which has emerged as the leading global reserve the world has been hanging on to as of late. Will the American currency ever be able to recover from this setback?
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The USD Reserve Setback: Is the Dollar No Longer a King?
According to the latest update by the Kobeissi letter, a new striking development has taken place where the US dollar’s positioning as a global reserve asset has taken a toll. The KL data outlines how the US dollar reserve share has dropped to its lowest in 20 years. Moreover, this percentage has declined 18 percentage points in the last 18 years.
On the other hand, gold has emerged as a leading asset to take note of as of late, crowned as the best reserve asset to explore currently. The central bank’s constant spree of purchasing gold has led the asset to take the top spot, dethroning the king dollar.
“BREAKING: The US dollar now represents ~40% of global currency reserves, the lowest in at least 20 years. This percentage has declined 18 percentage points over the last 10 years. Over the same period, gold’s percentage has increased 12 points, to 28%, the highest since the early 1990s. Gold now accounts for more global FX reserves than the euro, yen, and pound combined. This comes as central banks continue diversifying away from the US dollar while rapidly stockpiling gold in their vaults. As a result, gold prices rallied +65% in 2025, the largest annual gain since 1979, while the US Dollar Index declined -9.4%, its worst annual performance in 8 years.”
Will the Dollar Continue to Derail?
Per a recent Morgan Stanley update, the USD will continue to drop in 2026, with its DXY index falling as low as 94 before picking up pace in the second half of 2026.
“The U.S. dollar is likely to be on a choppy path over the next 12 months, with continued weakening in the coming months followed by a recovery and an end to the dollar’s bear market in the second half of 2026,” noted Morgan Stanley (BFSI).
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