by Elliott J. Schuchardt
At over $4,000 an ounce, gold is up more than 50% this year. Gold is now trading at double its price less than two years ago.
The gains are even more astonishing when we take a longer look at the data. Since 2000, gold is up by more than 1,300%. That is double the total return of the S&P 500 during that period. Gold even beats NASDAQ by a wide margin.
There is evidence that these gains will continue. The price of gold is being supported by the world’s central banks. These banks are selling dollar-denominated assets, and moving their funds into gold. According to UBS Global Wealth Management, for the past several years, these banks have been buying close to one thousand tons of gold each year. This establishes a solid price floor for the asset.
This is a significant shift in the world’s reserve assets. In 2018, the world’s central banks held about 33% of their reserves in U.S. Treasury bonds. Today, this number is only 23% — a substantial decline. As of early 2025, the world’s central banks held more gold than U.S. Treasury bonds, for the first time in decades.
Its worth considering the events that have caused this shift.
In late 2017, Russia held more than $100 billion of U.S. Treasury bonds. Russia began dumping those bonds in early 2018, due to a dispute with the United States over the Crimean peninsula, in Ukraine. By the end of 2018, Russia sold virtually all of its U.S. Treasury bond holdings. In addition, Russia encouraged others in the financial community to do the same. Russian authorities claimed that the United States was an unreliable financial partner, and that it was safer to hold other reserve assets.
Russia’s preemptive sale of bonds – and warning to the world community –were prescient. In early 2022, the United States, Western Europe and Japan froze $300 billion of Russian assets, in retaliation for Russia’s invasion of Ukraine. Since 2022, the West has refused to return these assets to Russia. Instead, the United States and its allies used these funds to collateralize loans to Ukraine, so that Ukraine could buy billions of dollars of weapons from the United States and its partners.
The seizure of Russia’s foreign reserves set off alarm bells among the world’s central banks. Whereas the dollar used to be viewed “as good as gold,” it is now viewed – by many – as an unreliable currency, which can be seized if Washington, D.C. does not approve of a country’s policies.
Since 2022, the world’s central banks have been quietly dumping U.S. dollars, and converting their foreign exchange reserves to gold. As Russia pointed out, gold has no counter-party risk. As long as it can be safely stored, then gold’s value can be maintained.
After the start of the Ukraine War, China began to reduce its stock of U.S. Treasury bonds. In January 2022, China held $1.033 of U.S. Treasury bonds. China began to sell the bonds after the start of the war. As of July 2025, China has sold about 27% of its bonds, bringing its holding to $730 billion. Japan sold about $150 billion of the bonds, a 12% reduction. India and Brazil have also reduced their holdings.
Some of this money has flowed into gold. Since the start of 2020, China has added approximately 450 tons of gold to its official reserves. Russia and India have also acquired large amounts of gold during these years.
A recent book, written by Elliott Schuchardt, argues that the price of gold could rise even further. In that book, America’s Achilles Heel: How to Protect Your Family When America Loses the Reserve Currency, Schuchardt argues that gold could go higher due to the declining value of the U.S. dollar.
In the book, Schuchardt talks about economist Robert Triffin. Triffin was a Yale economist, who formerly worked at the Federal Reserve. In 1959, Triffin testified before Congress about the status of America’s gold reserves. Triffin said that the United States would eventually have to leave the gold standard, because the United States was printing dollars that were not backed by gold in the nation’s vaults. Triffin was proved right ten years later, when Nixon abandoned the gold standard, in August 1971.
In the early 1960s, Triffin said that the United States would be courting disaster, if the United States used the dollar as an international reserve currency. According to Triffin, a reserve currency must be flexible enough to provide liquidity for the world economy. Liquidity is the ease with which an asset can be converted into cash, without a significant loss in value.
To keep the world economy growing, the United States would be required to run a trade deficit, to flood the world economy with dollars. These dollars were necessary to enable transactions worldwide, from London to Hong Kong. According to Triffin, this created a dilemma for the United States. If the United States ran a trade deficit for a long enough period of time, the world would eventually lose faith in the dollar, and the value of the dollar would collapse. This became known as the “Triffin dilemma.” It is still studied by economists today.
Triffin reached this conclusion by looking backwards in history. From 1850 to 1960, Britain issued the dominant reserve currency – the British pound. During the First and Second World Wars, Britain printed large amounts of pounds sterling, to finance the costs of the wars. The resulting surplus caused the currency to fall substantially in 1931, 1947 and 1967.
After 1967, Britain actively managed the decline of its currency, by working with the world community to minimize a decline in the value of the British pound.
The United States is in a similar situation today. Since 1971, America’s gold reserves have remained fixed, at 8,133.46 metric tons of gold. At current prices, this gold is worth about $1.065 trillion dollars. That’s a lot of money. However, since the early 1970s, the United States national debt has soared to $38.21 trillion. Most of that debt is denominated by U.S. Treasury bonds. As of late 2025, the United States has issued about $30.0 trillion worth of the bonds.
If, hypothetically, the entire debt were to be covered by the price of gold, it would mean that the price of gold would need to increase by 30 times, or to $120,000 an ounce. Neither Schuchardt nor I am not suggesting that that will occur. However, it indicates that gold could have a long way to climb, if any nation – or group of nations – were to seek to monetize its currency by means of gold. Gold could become unbelievably scarce, in a short period of time.
We are, of course, seeing changes in the world’s currency mix. For many years, it was fashionable to argue that the U.S. dollar had no competitor in the field of reserve currencies. The only serious contender was the euro. The euro peaked as a reserve asset in 2009, when about 27% of central bank assets were held in euros. That number has since declined, to about 20% of such assets.
With the stunning growth of China, the United States must be cognizant of a possible new reserve asset coming from the East. Chinese authorities are aware of the writings of Robert Triffin, and are unlikely to allow the renminbi to replace the dollar, as a reserve asset. However, they and their Russian partners have floated the idea of issuing a new reserve currency through a group of nations, known on Wall Street as BRICS.
BRICS is an acronym, standing for Brazil, Russia, India, China and South Africa. Schuchardt describes the history of BRICS in his book.
After the world financial crisis of 2008, the leaders of China, Russia, India and Brazil established BRICS as a means to counter dollar dominance in foreign trade. The leader of China’s central bank called for a new international reserve asset, to make the system more stable. Russian President Vladimir Putin was more critical. He said that the United States was a “parasite” on the world economy, and that international trade should be done in a currency other than dollars.
Since 2010, the BRICS alliance has grown to comprise ten countries. BRICS now accounts for 25% of the world’s landmass and 46% of the world’s population. On a purchasing parity basis, the BRICS economies comprise 35.6% of world GDP. More importantly, BRICS accounts for approximately 43% of global oil production, 55% of world rice production, and 48% of world wheat production.
It would be fairly easy for these countries to issue a new international reserve currency, and price their commodities exclusively in the new currency, rather than U.S. dollars. This poses a serious threat to the value of the U.S. dollar. As Schuchardt explains in his book, each day, the world oil market sells 100 million barrels of oil. At least 80% of this oil is sold in U.S. dollars. At $65 per barrel, this creates synthetic demand for about $5.2 billion U.S. dollars per day. If this money were to flow to the BRICS nations, the value of the U.S. dollar could collapse, essentially overnight. This would create a balance of payments crisis in the United States, likely leading to widespread civil unrest.
As of late 2025, there is no BRICS currency. However, it is foreseeable that these countries will sell their products in the future for a currency that they, alone, control and print. It has been suggested that the new BRICS currency could be called the “R5”, derived from the names of the five currencies issued by the founding members of BRICS: the renminbi, ruble, rupee, real, and rand. Personally, I prefer the name “bric” for the new currency unit.
Other proposals have suggested backing the new reserve currency, in part, with gold. If this were to occur, we can easily see the price of gold leaping upward, possibly in multiples. It is no wonder that the BRICS members are the countries most diligently acquiring gold for their central bank reserves.
The writing is on the wall. The smart money is buying gold, as a hedge against these foreseeable geopolitical changes.
Goldman Sachs says that gold could hit $4,900 an ounce by December 2026. What does this mean for your portfolio?
For many years, Ray Dalio, of Bridgewater Advisors, has recommended keeping 15% of your portfolio in precious metals. He was long viewed as a doomsayer, by other advisers who recommended only a 5% allocation for gold. Read more about What’s next for gold?
However, others on Wall Street are starting to get onboard, as events play out. Morgan Stanley recently suggested a model portfolio consisting of 20% gold, 60% equities and 20% in bonds. This is an astonishing shift, that may be prudent. The earth is shifting under our feet, and the United States may have little control of upcoming events.
For more information:
www.elliott-author.co
www.elect-schuchardt.com
