The US Dollar Index (DXY) has fallen to its lowest level in six weeks, signaling a shift in investor sentiment away from the US dollar. This decline is often associated with growing concerns over the sustainability of the Federal Reserve’s monetary policy and the increasing risks surrounding US government debt.
On May 1, US Treasury Secretary Scott Bessent reassured the public, telling CBS, “The country is never going to default,” although he acknowledged that “we are on the warning track.” These remarks followed warnings from JPMorgan Chase CEO Jamie Dimon, who voiced concerns about a proposed House bill that would raise the debt ceiling by an additional $4 trillion.
A weaker DXY generally encourages holders of US federal debt—currently valued at $31.2 trillion—to seek alternative investments that offer better returns. While fixed-income investments can provide steady yields, the volatility of the US dollar pushes investors to explore other options, particularly if foreign currency-based investments offer higher yields.
The US Faces Pressure to Diversify Reserves
Despite gold’s historical appeal, there are factors that could limit its demand as a safe-haven asset. The US government is the largest holder of gold, and there is potential for the Treasury to sell a portion of its gold reserves to strengthen its fiscal position. A move to repurchase some of its long-term debt could potentially boost the US dollar, though the effectiveness of such a strategy remains questionable.
For example, even if the US were to sell off 17% of its gold reserves—equivalent to $171.8 billion at current prices—it would still retain a significant lead in global gold holdings, outpacing the next largest holders by more than 100%. However, that sum would cover just three weeks of the US federal deficit, rendering the impact relatively minimal in the broader context.
In contrast, investing $171.8 billion in Bitcoin could position the US as a dominant force in the cryptocurrency space, easily surpassing China’s estimated holdings of 190,000 BTC. This scenario has become increasingly plausible following the March 2025 signing of the Strategic Bitcoin Reserve Executive Order by President Donald Trump, which could accelerate the US’s adoption of Bitcoin as a reserve asset.
US Gold Holdings vs. Bitcoin Growth Potential
While the US holds the largest gold reserves globally, it does not rank among the top four gold producers. According to the World Gold Council, China, Russia, Australia, and Canada are the leading gold-producing nations. Consequently, the US has limited incentive to actively promote rising gold prices, particularly amid ongoing trade disputes and rising geopolitical tensions.
Data also reveals a shift in investor sentiment, with net outflows from gold exchange-traded funds (ETFs) despite the recent increase in gold prices. In contrast, spot Bitcoin ETFs have seen a surge in inflows, with $3 billion recorded since May 15. This trend doesn’t necessarily indicate that investors are moving away from gold to Bitcoin, but it does suggest a lack of confidence in gold’s short-term upside potential.
Gold, as a $22.7 trillion asset class, is viewed by many investors as a relatively mature market, which could limit its appeal when compared to stocks or alternative assets. Meanwhile, Bitcoin’s market capitalization of $2.1 trillion signals significant room for growth and investment.
Rather than competing directly with gold, Bitcoin is emerging as a complementary asset—gaining traction as concerns grow over the US government’s fiscal stability. As these concerns fuel gold’s rise, Bitcoin is also benefiting from its reputation as a decentralized, inflation-resistant alternative.
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