Over more than 50 years, the value of the dollar against gold has plummeted by 99%, hitting a historical low.

Reference Message Network reported on April 29 according to The Nikkei Economic News on April 27, the value of the US dollar relative to gold has plummeted by 99% over more than 50 years.

Last week, the value of the US dollar hit a historical low. Since the historical event when the Nixon administration announced the decoupling of the US dollar from gold in 1971, the value of the US dollar calculated in gold has been continuously declining and has plunged to 1% of its original value after more than half a century. The behind-the-scenes reason for the sharp decline in the value of the US dollar is the sharp increase in the supply of US dollars and the continuous decline in the credit of the US dollar as a benchmark currency.

"There are plenty of evidences to support the decline in the credibility of the US dollar." Hiroshi Watanabe, head of the Financial Market Research Department at Sony Financial Group, expressed concern about Trump's policies.

The primary cause is high tariffs pushing up prices. Rising prices mean a decrease in the value of money. Additionally, although Trump has withdrawn related comments, his remarks questioning the independence of the Federal Reserve still sparked controversy.

Due to the historical origin of the US dollar being backed by gold, its value is relatively easy to measure against gold. The post-World War II international monetary system, the Bretton Woods system, adopted the gold exchange standard, with an exchange rate of $35 per ounce of gold. On April 22 this year, the price of the New York market gold futures (main contract) broke through $3500 per ounce, reaching 100 times the level that year, causing the value of the US dollar to shrink to 1% of that time.

The devaluation of the US dollar began in 1971 when Nixon announced the end of the dollar's convertibility into gold, known as the "Nixon Shock." After removing the constraint of gold reserves, the issuance of US dollars continued to increase.

According to Federal Reserve data, the money supply "M1," which measures cash and demand deposits of businesses and households, expanded from $225 billion in August 1971 to $18.56 trillion in March 2025, increasing more than 80 times.

Meanwhile, the annual gold production increased from approximately 1200 tons in 1971 to about 3600 tons in 2024, growing only about 200%, which is negligible compared to the speed of the expansion of the US dollar. Takashi Yoshida, a commodities analyst at Rakuten Securities Economic Research Institute, pointed out: "The relative increase in the total amount of US dollars compared to the total amount of gold has led to the dilution of its currency value."

The devaluation of the US dollar relative to gold mainly went through three stages. The first stage was during the inflationary period of the 1970s, affected by the oil crisis, prices accelerated their rise, and the price of gold rose by about 1200% in ten years, while the value of the US dollar decreased by about 92%.

The second stage was in the first decade of this century, due to economic concerns triggered by the "9/11" incident and the implementation of large-scale monetary easing policies after the financial crisis of 2008, the price of gold rose by about 400% in ten years, and the value of the US dollar decreased by about 80%.

America also launched large-scale monetary easing policies during the pandemic, leading to inflation. Although the price of gold has risen significantly, the current increase is only about 100%.

Due to Trump's policies exacerbating concerns about inflation and the credibility of the US dollar, the market generally expects an increase in gold. Goldman Sachs predicts that the benchmark gold price will reach $3700 per ounce by the end of 2025, and if the economic situation worsens, it may rise to $4500.

The structure of foreign exchange reserve assets held by central banks changes with the times. Since the acceleration of globalization after the fall of the Berlin Wall in the 1990s, the European Central Bank sold interest-free asset gold and shifted to holding US Treasury bonds and other US dollar assets, synchronously enhancing the credibility of the US dollar.

However, the 2008 financial crisis reversed this trend. Market analyst Hideo Toyoshima analyzed: "After witnessing the violent turmoil in the American financial markets, the market perception that holding US dollar assets is safe has completely collapsed."

The report stated that after the outbreak of the Russia-Ukraine conflict, "de-dollarization" accelerated, centered around emerging countries. This indicates that the global economy is shifting from integration to fragmentation. The unprecedented market attention on gold reflects the crisis of confidence in the US dollar. Some Japanese market analysts believe: "Apart from gold, investors have no other options, and there is still room for gold to rise even when priced in US dollars."

Original source: https://www.toutiao.com/article/7498698653754753570/

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