The shift became clear in 2022, when around $300 billion of Russia’s central bank reserves were frozen after the Ukraine invasion. It sent a strong global message: holding dollars is no longer just a financial decision, but also a geopolitical one.
This is where gold comes back into focus, not just as a trade, but as a signal. At its core, gold rises when confidence in global systems weakens. What makes this phase unique is the nature of demand. It is not driven by panic, but by steady and deliberate accumulation, largely from central banks, making it more structural and long term in nature.
A World Moving Away from One Centre
The global economic system is gradually shifting from a single-centre structure to something more distributed.You can see it in small but meaningful ways:
Countries settling trade in local currenciesGroups like BRICS are actively working towards reducing reliance on the dollarConversations around oil trade in yuan are gaining tractionThe idea of de-dollarisation becoming part of mainstream policy discussions
War, Power, and Economic Leverage
Geopolitics is adding another layer to this shift. Despite repeated claims from Donald Trump that the United States has “won” the conflict with Iran, the reality appears more complex. In today’s environment, the advantage is not just about military strength, it is about economic leverage.This is evident in the Strait of Hormuz, a key route for global oil flows. With prices rising and markets on edge, Iran’s influence over this passage gives it a significant strategic edge.At the same time, the US response has seemed inconsistent, with signals of possible negotiations followed by clear denials. This lack of clarity has unsettled global markets, and as confidence weakens, it has also started to raise broader questions about the credibility of the US, and, in turn, the dollar itself.
Pressure Points on the United States
The US is also navigating several internal and external constraints that shape how global markets perceive its position.Globally, support from traditional allies like NATO has been less unified this time than in past conflicts.Then there are macroeconomic realities. US debt is approaching $40 trillion, bond yields remain elevated, and policy shifts, from tariffs to tensions with the Federal Reserve, have added to uncertainty.None of these factors create an immediate crisis. But together, they shape perception. And in financial markets, perception often matters as much as reality.
The Gold Revaluation Debate
Interestingly, even before the recent geopolitical escalation, there were discussions around the possibility of the US revaluing its gold reserves.
Currently, US gold holdings are still valued at an outdated price of $42.22 per ounce. If revalued to current market levels (above $5,000), the total value could jump from around $11 billion to nearly $1.3 trillion.
Such a move would significantly strengthen the US balance sheet and could help manage fiscal pressures. But it would also send a powerful signal, bringing gold back into the centre of the monetary system.
And if that happens, the ripple effects could be global. Central banks may accelerate gold purchases, and confidence in paper currencies could weaken further.
In fact, central bank buying is already strong and is expected to average around 60 tonnes per month in 2026. If this trend continues, gold’s role in the global financial system could become even more prominent.
Commodity Cycles: Learning from the Past
Commodities periodically move through long-term cycles of rising and falling prices, driven by changes in economic growth, demand and liquidity.
The last major gold cycle, from 2000 to 2011, began after the dot-com crash, gained momentum during the financial crisis, and ultimately delivered nearly 600% returns.
The current cycle started around 2018, when gold was near $1,200. Since then, multiple forces have driven its rise, pandemic-era liquidity, high inflation and rising geopolitical tensions.
Unlike previous cycles, this one is not driven by a single theme. It is the result of overlapping structural shifts. Even the recent pullback in gold, driven by rising oil prices, tighter monetary expectations and higher interest rates, appears more like a pause than a reversal.
What Could Challenge the Bull Case?
There is, however, an interesting divergence playing out beneath the surface.
The ongoing US-Iran tensions have created pressure on several fragile economies. To manage rising energy costs and defend their currencies, some countries are being forced to sell gold and convert it into dollars. Turkey, for example, has sold nearly $8 billion worth of gold in recent months.
But this is only one side of the story.
Stronger economies, with more stable external positions, are doing the opposite. Institutions like the People’s Bank of China continue to accumulate gold as part of long-term reserve diversification. India as well has shown no indication of selling or policy shift.
This creates a clear divide: weaker economies sell gold to meet short-term dollar needs, while stronger ones buy gold to prepare for a different future.
Technical Outlook on Gold
Technically, gold has shown resilience, finding support in the 4,200-4,300 range and forming a strong rejection candle, indicating buying interest at lower levels and a possible reversal. As long as this support holds, gold can move towards 5,000, with further upside towards the 5,300-5,400 resistance zone. In rupee terms, this translates to potential targets of Rs 1,66,000, with extended upside towards Rs 1,82,000.
As the global system gradually shifts towards a more multipolar structure, gold is increasingly being viewed as a strategic asset rather than just a hedge. While short-term volatility may persist, the broader trend remains upward, supported by ongoing structural changes.
(The author Amit Pabari is MD, CR Forex Advisors)
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of The Economic Times.)
