Tara Burke
Gold prices tell part of the dollar story right now, with the SPDR Gold Shares ETF (GLD) holding near multiyear highs even as the U.S. dollar remains the backbone of global trade nearly 50 years after Washington cut the last formal tie between the two. That gap between a resurgent gold market and an unshakeable dollar system is worth unpacking.
Why the Greenback Still Runs the Table
Roughly 88 percent of all foreign exchange transactions worldwide involve the U.S. dollar on one side of the trade, according to the Bank for International Settlements' 2022 Triennial survey (that figure totals 200 percent because currency pairs involve two sides). The euro trails at just 31 percent. No other currency comes close, and that dominance shapes everything from how oil gets priced to how central banks build their reserves.
Commodities like crude oil, tracked by funds such as the United States Oil Fund (USO), are priced in dollars almost universally. That arrangement means demand for dollars rises whenever global commodity markets are active, reinforcing the currency's reach well beyond U.S. borders. Gold, silver and other raw materials all settle in greenbacks, which is part of why the dollar's fortunes and commodity markets move in tandem so often.
The Gold Standard's Long Goodbye
The relationship between the dollar and gold did not end in a single moment. It unraveled over four decades. The Coinage Act of 1792 originally pegged the dollar to specific weights of silver and gold, tying its purchasing power directly to precious metal. That link began to fray in 1933, when the government stopped redeeming notes for gold and instead required citizens to surrender gold at $20.67 per troy ounce, a price that climbed to $35 by January 1934.
By the 1960s the arrangement was straining under its own weight. Congress repealed the requirement that Federal Reserve notes be backed by gold reserves in 1968. Three years later, in 1971, the U.S. stopped freely converting dollars into gold at a fixed exchange rate. Two rounds of devaluation followed in 1972 and 1973, and by October 1976 lawmakers struck gold from the legal definition of the dollar entirely. That closed the door on more than 180 years of metal backed currency.
The lingering echo of that history shows up today in how investors treat gold as a hedge. When confidence in fiat currencies wavers, or when real yields on instruments like the 20 year Treasury ETF (TLT) shift, gold and silver, tracked through funds like SLV, often catch a bid. That dynamic is less about gold reclaiming a monetary role and more about it serving as insurance against currency and inflation risk.
What Keeps Dollar Dominance Intact Despite the Euro and China
Questions about whether the dollar's grip is loosening have circulated for years, fueled by the euro's rise and China's expanding footprint in global trade and finance. Yet the data keeps pointing the same direction: the dollar's share of global reserves and transactions has proven remarkably durable.
Three forces explain that staying power. First, the size and stability of the U.S. economy give foreign governments and companies confidence to hold dollar denominated assets, including Treasury bonds. Second, the sheer scale of dollar usage creates a network effect: businesses and banks keep using dollars because everyone else does, making it the path of least resistance for cross border trade. Third, commodity pricing in dollars, from oil to industrial metals, sustains steady global demand for the currency regardless of where the goods are produced or consumed.
That said, the dollar's strength or weakness still ripples through equity and real estate markets. A stronger dollar can pressure multinational earnings reflected in indexes tracked by SPY and QQQ, while a softer dollar sometimes lifts commodity linked and real estate investments, including those tracked by VNQ, by making U.S. assets cheaper for foreign buyers.
A Currency Built on Trust Rather Than Metal
The dollar's authority now rests entirely on confidence in U.S. institutions and economic output rather than any physical commodity backing it. That shift became official history in December 2022, when Treasury Secretary Janet Yellen and U.S. Treasurer Lynn Malerba became the first two women to sign U.S. currency, a symbolic marker on a system that has evolved considerably since the first green tinted demand notes financed the Civil War in 1861.
Central banks worldwide still park the bulk of their foreign reserves in dollars, and dollar denominated bonds remain a default safe haven for governments and corporations alike. Whether gold's recent strength through GLD signals renewed anxiety about currency stability, or simply reflects routine portfolio hedging, the dollar's underlying architecture as the world's primary settlement and reserve currency has not meaningfully cracked.
Aaron Roberts
Trevor Harris