US Dollar’s collapse, rise of Bitcoin and the run of gold

The real threat to the prominence of USD as a reserve currency had been posed not by these emerging alternative currencies. It has been made by gold which is a close substitute for USD as a store of value and Bitcoin, a cryptocurrency that has offered enormous speculative profits to its holders. Except the possibility of making capital gains out of any increase in the market prices, gold does not earn any revenue for the holder. In fact, gold makes a negative annual earning since the holders must pay a commission or a service charge to the depository which provides safekeeping services to investors

- By W.A. Wijewardena

The main reason for the decline in the status of USD as a reserve currency has been the acceleration of US inflation rate reducing its real value within the domestic economy

Figure 1 shows the price of a fine ounce of gold from 1973 to October 2025. The price of gold had been at about $ 500 per fine ounce in 1980. This has risen progressively to $ 4,231 per fine ounce by mid-October 2025. In terms of the value of gold, USD has fallen from 62 mg in 1980 to 7 mg in October 2025. This is equal to an 88% decline in the value of gold. Gold prices have started to steep up sharply after Donald Trump was elected to US presidency in January 2025; at that time a troy ounce of gold amounted to $ 2,624.

Because of his unilateral and imprudent tariff policy, the trust which the world nations had placed with USD began to get eroded compelling them to use gold as a safety haven amidst the fear of declining US economy coupled with an explosion of the price levels. He had started his second term when a dollar was worth 12 mg of gold. During the first 10 months of his presidency, value of a dollar fell to 7 mg of fine gold. Markets do not follow the whims and fancies of political leaders. They vehemently oppose them and follow a path directed to them by a collective choice made by millions of individual decision makers.