Central Banks Warned Trillion-Dollar Debt Is Killing The US Dollar

A recent survey conducted by institutional asset manager Invesco shows that central banks worldwide no longer view the US dollar as a reliable currency as they did a few years ago.

The survey, which included responses from 57 central banks, reveals that they are worried about the US’s geopolitical actions and mounting debt levels that pose a threat to the dollar’s stability. Specifically, the survey points to the US’s treatment of Russians in response to the conflict with Ukraine as a clear indication of their concerns.

“The freezing of Russian assets by Western nations has thrust the world’s reliance on the US dollar as the dominant reserve currency into the spotlight, raising questions about its long-term viability amidst high US debt levels. A growing percentage of central banks year-on-year believe that the US debt levels are negatively impacting the Dollar…”

The notes continued and revealed the following:

“While very few actually see a world where the Chinese yuan becomes the world reserve currency, central bankers are still expecting to increase their renminbi holdings over time, driven by “strong performance and uncorrelated returns,” according to the survey.”

According to Invesco’s report, central bankers think that gold has become a more appealing asset now that the dollar has lost some of its appeal.

“A substantial percentage of central banks are concerned about the precedent set by the US freezing of Russian reserves, with the majority (58%) agreeing that the event has made gold more attractive. Consequently, central banks now prefer to hold physical gold rather than gold ETFs or derivatives (figure 5.6).”

The same notes reported the fact that the physical gold holdings have increased the most when compared with 2020, while gold ETF usage has fallen.

Stay tuned for more news and make sure to check out the crypto markets as well, as new bulls are predicted to come into town.