TASS reported that the first deputy executive director of the International Monetary Fund (IMF) Gita Gopinath said that some countries are making efforts to reduce their dependence on the USD due to shocks related to the COVID-19 pandemic and the conflict in Ukraine, as well as concerns about national security.
Some countries are reassessing their heavy dependence on the US dollar in international transactions and foreign exchange reserves, Gopinath told the Stanford Institute for Economic Policy Research on May 7. After years of major shocks, including the COVID-19 pandemic and the Russia-Ukraine war, countries are reassessing their trade partners based on concerns about the economy and national security.
However, Gopinath said, "despite the increased geopolitical risks, the latest data shows that the USD is still dominant. In the international payment system SWIFT, the USD still accounts for more than 80% of commercial finance, as most commodity transactions continue to be invoiced and paid in USD.
The US dollar also accounts for nearly 60% of foreign exchange reserves despite a gradual shift away from greenback and to non-traditional currencies such as the Australian and Canadian dollars.
Regarding gold, according to Ms. Gopinath, the most notable development in the period of 2022-2023 is the increase in central banks' gold purchases.
Gold prices have hit a record high recently, as gold is often viewed as a politically neutral safe-haven asset that can be stored at home and kept off sanctions or seizures.
Ms. Gopinath said that the share of gold in foreign exchange reserves of the group of countries leaning towards China has increased since 2015 - a trend not only driven by China and Russia. The important thing is that during the same period, the gold ratio in foreign exchange reserves of countries in the bloc leaning towards the US is generally stable.
This shows that some central banks' gold purchases may be driven by concerns about the risk of sanctions, Gopinath said. This is in line with a recent study by the IMF confirming that foreign exchange reserve managers tend to increase their gold holdings to prevent economic and geopolitical instability, including the risk of sanctions.
Looking at China, the share of gold in total foreign exchange reserves has increased from less than 2% in 2015 to 4.3% in 2023. During the same period, the holding value of Chinese US Treasury bonds against foreign exchange reserves decreased from 44% to about 30%.
The downward trend still exists even when considering the fact that some US bonds held by China could be held at the European clearinghouse Euroclear in Belgium.
