KARACHI:

“The dollar is going to collapse. The dollar is going to be replaced by gold. Central banks are buying gold to back up their currencies. They are getting rid of dollars. They are getting rid of treasuries. We are headed for an economic crisis that will make the 2008 financial crisis look like a Sunday school picnic,” said Peter David Schiff, an American stockbroker and financial commentator, on a recent FoxNews show.

Schiff’s assessment may sound stark, but this isn’t exaggeration. It isn’t doom-saying. It’s happening – now, in real time. The yellow precious metal posted unprecedented gains throughout 2025, soaring as much as 55% over the year. The pace dramatically accelerated in early 2026, pushing prices past $5,000 per ounce and briefly above $5,200 before an equally dramatic pullback. As of February 12, gold was trading near $5,070 – still holding firmly above the psychologically critical $5,000 threshold.

Despite this brief volatility, Fibonacci projections suggest the rally may not be over. Gold could climb beyond $6,100 per ounce, while a more aggressive bullish extension points towards the $7,200 region. From current levels, that would represent potential upside of roughly 40% or more. While projections are not guarantees, the technical structure continues to indicate that momentum remains decisively skewed to the upside.

This begs the question: what is driving this unprecedented upswing? Is it global trade uncertainty driven by President Donald Trump’s tariff policies, accelerated central bank buying of gold, rising geopolitical tensions, or a weakening dollar?

Some analysts see a convergence of all these forces. Others argue, however, that the main driver behind the surge in gold – and to some extent silver – has been the ongoing weakening of the dollar. Short-term concerns over a potential US government shutdown, amid disputes over funding for the Department of Homeland Security, added further pressure on the greenback. Beyond that, a broader “Sell America” narrative has begun to gain traction. Investors are increasingly focused on relative growth differentials, expanding fiscal deficits, and a reassessment of capital flows into US assets. Together, these dynamics have created a powerful macroeconomic backdrop – one that continues to underpin gold’s historic rally.

The dollar’s decline quickened after Trump signaled that his administration would tolerate a weaker currency. Markets interpreted it as a shift away from traditional strong-dollar rhetoric, fueling fresh selling pressure. At the same time, speculation surrounding potential US-Japan currency coordination – amid close monitoring of yen strength and its trade implications – added another layer of uncertainty to foreign-exchange markets. The potential appointment of Rick Rieder of BlackRock as Chair of the Federal Reserve further reinforced the narrative. Rieder is widely known for advocating more aggressive interest-rate cuts. The prospect of a distinctly dovish monetary policy stance – combined with political acceptance of a weaker dollar – has strengthened the perception that currency debasement remains a viable policy lever.

Another key driver of the current “gold rush” is the sustained buying of gold by central banks worldwide, as they bolster reserves amid weakening confidence in the greenback. The dollar’s share of global foreign exchange reserves has dropped from two-thirds a decade ago to about 57% today. It’s a notable shift, but far from indication of a collapse.

Economists argue that the dollar retains its dominance largely because no credible alternative has emerged. Other fiat currencies, such as the pound, euro, yen, or yuan, lack the scale, liquidity, and institutional depth required to rival the dollar’s global role.

As a result, many institutions are increasingly turning to gold – the world’s oldest and most time-tested store of value. Unlike fiat currencies, gold cannot be devalued by any single government, offering protection against inflation, currency volatility, and geopolitical risk. Central banks in emerging markets, including China, Poland, India, and Turkey, have been especially active buyers, while repatriation of overseas-held gold underscores a desire for direct sovereign control.

The trend also reflects broader concerns about the stability of the global monetary system, with rising geopolitical tensions and unplanned fiscal policies pushing nations to diversify away from the American currency. Analysts see gold not only as a hedge but as a key pillar of financial security in an uncertain world. With central banks’ gold purchases reaching record levels, this shift could reshape global reserves and signal a new era in monetary policy.

Although the idea of “de-dollarisation” of the global financial system has been mooted for years – largely spurred by concerns over the “weaponisation” of the dollar by the US – the seizure of $300 billion in overseas Russian assets by the US and its European allies has sped up this trend. Countries are increasingly scaling down their participation in American securities, moving away from the dollar, trading in local currencies, and buying more and more gold to back up their local currencies. The gold share in central banks’ reserves has doubled in the past decade to more than a quarter, the highest level in almost 30 years.

“Experts say central banks are also stuffing their vaults as an insurance policy in a volatile world. Many are also rushing to repatriate gold stockpiles held overseas, and slashing their exposure to the US dollar,” wrote The Guardian senior economics correspondent Richard Partington in an analysis last month. Russian President Vladimir Putin believes that the US has itself to blame for “single-handedly” subverting confidence in the dollar through its sanctions policy. “Our American partners are making an enormous strategic mistake; they are undermining confidence in the dollar as a universal, and in fact the sole reserve currency today, subverting faith in it as a universal tool. They are indeed sawing off the branch they are sitting on,” Putin said at the Russian Energy Week in Moscow late last year.

While Putin struck a diplomatic tone, Raphael Gallardo, Chief Economist at the asset manager Carmignac, offered a far more blunt assessment. “It is the law of the jungle when we see what the US is doing,” he said. “Investors – private and sovereign – believe their strategic reserves are no longer safe in dollar terms, as they can be confiscated overnight. The dollar is losing the credibility as the nominal anchor of the global monetary system because the Fed is losing credibility, and US Congress is losing its credibility,” he added. As 2026 unfolds, investors are closely monitoring several key factors: US fiscal and monetary policy, the trajectory of the US dollar, and geopolitical risks. Gold’s orderly ascent reflects growing skepticism towards fiat currencies and heightened demand for tangible stores of value.

That said, it’s premature, and unrealistic, to write the epitaph of the dollar’s reign in the global financial system. While the greenback’s weakness is not new, some analysts say the pace of recent declines has intensified investor focus on precious metals as both safe havens and strategic assets. For now, gold remains the “grown-up” in the room – a stabilising force amid uncertainty. Strategic missteps by Washington – from sanctions policy to tolerance for currency weakness – have shaken confidence in the dollar’s long-term reliability. In response, central banks are accelerating gold purchases to diversify reserves and hedge geopolitical risk. Analysts believe this structural shift will keep gold’s rally firmly intact through 2026.

The writer is an independent journalist with a special interest in geoeconomics