The erosion of dollar hegemony is manifesting in a quantifiable way.
On Friday, Bloomberg macro strategist Simon White wrote that under the impact of the U.S.-Iran war, the value of gold reserves held by global central banks has, for the first time, surpassed the scale of U.S. dollar reserves after valuation adjustments. This milestone occurred in the Bretton Woods II era and marks the first such instance since the International Monetary Fund (IMF) began publishing relevant data in the late 1990s.
It is noteworthy that while the market has previously reported &#34;gold reserves surpassing dollar reserves,&#34; those reports cited the IMF's nominal dollar reserve figures of approximately $7.5 trillion, which include the cumulative interest income from dollar assets. This latest analysis adopts a different methodology: after stripping interest income from dollar reserves and adjusting for valuation, the resulting figure is approximately $4 trillion, only slightly more than half the nominal value.
Using this adjusted metric provides a more equitable benchmark for comparison with gold reserves, as gold itself does not generate interest. Under this scope, the value of gold reserves has surpassed dollar reserves for the first time, marking another substantial turning point in the dollar's dominance.
Even if the U.S.-Iran ceasefire agreement holds, Simon White believes the damage inflicted on the dollar system by this conflict is likely irreversible. The decline of the dollar will not be a sudden collapse in a single dramatic moment, but rather a slow erosion through a series of milestones, much like the British pound’s loss of its reserve currency status.
<h2>Adjusted Dollar Reserves Surpassed by Gold for the First Time: Data Methodology is Key</h2>
To understand this historic shift, one must first clarify the difference in data methodology.
The nominal scale of global dollar reserves published by the IMF is approximately $7.5 trillion, a figure that includes interest income accumulated by central banks holding dollar assets over many years. However, since gold produces no interest, a direct comparison between nominal dollar reserves and gold reserves is inherently biased.
Simon White utilized the Bloomberg U.S. Treasury Index to strip interest income from nominal dollar reserves, arriving at a valuation-adjusted dollar reserve scale of approximately $4 trillion. Measured by this standard, global central bank gold reserves have surpassed dollar reserves for the first time, breaking the pattern established since the inception of the Bretton Woods II system.
This adjusted figure more accurately reflects the &#34;active demand&#34; for dollar assets by central banks. Data shows that since the peak of official dollar reserves in 2014, the value of adjusted dollar reserves has cumulatively declined by about 15%; meanwhile, physical gold holdings (in tons) by global central banks—primarily those in emerging markets—have increased by about 15% over the same period. Simon White argues that this contrast is difficult to refute: actual demand for dollar assets by central banks is substantially weakening.
<h2>Shift in Reserve Management Behavior: The Dollar &#34;Recycling&#34; Mechanism Under Pressure</h2>
The erosion of the dollar's reserve status is already evident in the operational behavior of central banks.
Reserve management institutions traditionally exhibited a clear pattern of contrarian trading in their dollar operations—buying when the dollar fell and selling when it rose. However, this pattern has quietly shifted. In recent years, the continuous decline in the dollar’s exchange rate has failed to trigger significant buying by reserve managers, marking a notable departure from historical trends.
The core logic supporting the dollar system is the implicit contract of the so-called &#34;Pax Americana&#34;: trade surplus nations recycle their dollar earnings into dollar assets, providing low-cost financing to the U.S., while the U.S. provides security guarantees and global system stability in return. This &#34;dollar recycling&#34; mechanism is now under increasing pressure.
Using Middle Eastern oil producers as an example, the sensitivity of Saudi Arabia's current account surplus to oil prices has decreased significantly in recent years as domestic diversification needs have risen, leaving less surplus capital available for recycling into dollar assets. More fundamentally, if the U.S. is no longer perceived as a reliable security guarantor, the incentive for nations to use the dollar in trade and return dollar earnings to the U.S. will continue to weaken.
<h2>Energy Price Shocks Exacerbate Stress on the Dollar System</h2>
The energy price shocks resulting from the U.S.-Iran war are squeezing the dollar system from both the supply and demand sides.
While oil and gas prices retreated following news of a ceasefire, they remain significantly higher than pre-war levels. For energy-importing countries, sustained high energy costs force them to liquidate assets to raise dollars, intensifying selling pressure on dollar assets. Simultaneously, some energy-exporting countries are facing cash-flow pressures due to disruptions in product sales.
This two-way squeeze was reflected in market performance during the war: gold and U.S. Treasuries exhibited &#34;risk asset&#34; characteristics—rising when tensions eased and falling when they escalated—diverging from their traditional safe-haven attributes.
<h2>Resonance of Multiple Indicators: The Fade of Dollar Dominance Accelerates</h2>
Gold reserves surpassing adjusted dollar reserves is just one signal of the dollar’s waning dominance; other indicators are sounding similar alarms.
Data indicates that the proportion of global trade settled in dollars has fallen to approximately 40% in recent years, while the shares of the Euro and RMB have risen. Cross-border loans denominated in dollars have retreated to 60% of the global total. U.S. Treasury holdings by central banks are now lower than their gold holdings, and the dollar's share of global foreign exchange and gold reserves is also in rapid decline.
Simon White notes that the erosion of the dollar's status will not happen overnight, as the lack of a viable alternative reserve and financing asset provides an objective buffer. However, he emphasizes that this does not mean the problem is non-existent; rather, it is a case of &#34;the tire has been punctured, and the air is continuously leaking.&#34;
In his view, a consensus has emerged among market participants following the U.S.-Iran war: the rules of the game have changed. As &#34;reducing dollar assets&#34; becomes a rational choice for an increasing number of actors—and as this realization becomes common knowledge—the continued decline of dollar dominance will be unstoppable, and the long-term upward trajectory for gold will be further reinforced.

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The value of global central bank gold reserves has surpassed valuation-adjusted U.S. dollar assets for the first time. Bloomberg strategist Simon White points out that after excluding interest income, the actual scale of dollar reserves is only approximately $4 trillion, far below the nominal $7.5 trillion. Since peaking in 2014, adjusted dollar reserves have fallen by 15%, while gold holdings have increased by 15% over the same period. Like the British pound before it, the dollar's hegemony is being slowly eroded

- A significant shift has occurred as the value of global central bank gold reserves has surpassed adjusted U.S. dollar asset reserves for the first time, highlighting erosion of the dollar's dominance.  
- This new valuation method, which excludes interest income from dollar reserves, reveals an adjusted value of around $4 trillion, contrasting with the nominal $7.5 trillion previously reported by the IMF.  
- Analysts suggest that ongoing geopolitical tensions and changing reserve management behaviors indicate a fundamental decline in demand for dollar assets, signaling a major transition in global financial dynamics.

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War’s “Lasting Damage” to the Dollar System—Global Gold Reserves “Surpass” Dollar Reserves for the First Time