Is the era of de-dollarization coming? Jefferies: Gold becomes the best risk hedging tool

The interventionist policies of Trump’s second term are triggering a reevaluation of the global monetary system. J.P. Morgan economist Mohit Kumar recently released a report indicating that this policy orientation could accelerate the de-dollarization process in various countries, weakening the US dollar’s status as the world’s reserve currency. Against this backdrop, gold and bulk commodity assets are considered the optimal choices for diversifying away from dollar risk.

How Trump’s Interventionism Drives De-dollarization

Policy Logic Chain

According to Kumar’s analysis, the interventionist policies of the Trump administration may accelerate de-dollarization through the following channels:

• Escalation of Trade Protectionism: Tariff barriers and trade restrictions could provoke tensions in the international trade system
• Geopolitical Uncertainty: Unilateral policies may undermine the US’s international credibility and influence
• Risks of Dollar Weaponization: Countries fear that US sanctions could be used as political tools, prompting them to seek alternatives
• Reserve Diversification Needs: Central banks in various countries are proactively reducing dollar dependence and increasing holdings in other reserve currencies and assets

Kumar’s core view is that under this “new political order,” countries will actively reduce their reliance on the dollar as a reserve currency. This is not a sudden crisis but a gradual adjustment process.

Why Now

The uncertainty surrounding Trump’s policies acts as a catalyst for this process. Compared to traditional monetary policy, interventionist policies are more volatile, motivating central banks and sovereign funds to seek more stable asset allocation strategies.

Why Gold Is the Preferred Safe-Haven Asset

Gold vs. US Dollar Comparison

In the context of de-dollarization, gold’s appeal lies in:

The Complementary Role of Bulk Metal Assets

In addition to gold, Kumar also recommends increasing holdings of other bulk metal assets. These assets share the following characteristics:

• Low or negative correlation with the US dollar
• Practical industrial applications
• Not directly controlled by any single country’s policies
• Relatively sufficient global liquidity

Market Implications and Future Observations

This report reflects institutional investors’ concerns about the macro environment. If central banks indeed accelerate de-dollarization, the following chain reactions may occur:

• Rising Gold Demand: Increased reserve allocations could push gold prices higher
• Pressure on the US Dollar: Long-term depreciation pressures may intensify
• Strengthening of Commodities: Overall demand for commodity assets could increase
• Asset Allocation Changes: Institutional investors may adjust currency exposures in their portfolios

Summary

Trump’s interventionist policies have indeed provided new impetus for de-dollarization. J.P. Morgan’s report represents the mainstream Wall Street view on this trend. Gold and bulk commodity assets are shifting from traditional safe-haven tools to strategic asset allocation instruments, reflecting a market reassessment of the dollar’s long-term prospects.

Regardless of how this process unfolds, the key lies in the actual actions of central banks and investors. Future focus should be on whether global central banks’ gold purchases continue to rise and whether the share of the US dollar in global foreign exchange reserves truly declines. These data points will determine how quickly de-dollarization moves from a conceptual idea to reality.