Canary in the gold mine: Rethinking the global order

Below is a summary of the key insights from our “Canary in the Gold Mine: A Global Reordering” white paper. For the full analysis and detailed conclusions, read the complete white paper here.

Despite strong US growth, resilient equity markets, and a dominant US dollar (until the end of 2024), gold prices have continued to rise. Rather than contradicting this strength, gold’s performance reflects growing concern about how the global system itself is evolving.

The core argument behind this assertion is straightforward: The world is entering a period of structural transition in geopolitics, economics, and finance. The US-led system that has shaped global markets for decades is not disappearing completely, but it is becoming less predictable, less trusted, and more contested. Supply and inflation shocks are therefore likely to be more frequent.

Gold’s rise is one expression of this shift — a signal that investors should rethink diversification in a more fragmented and politicised world.

Gold and the breakdown of trust

For most of the post war period, confidence in fiat currencies, institutions, and open markets reduced the need for investors and central banks to hold gold. But rising geopolitical rivalry, the spread of trade barriers and the increasing use of financial sanctions have changed how official investors think about safety.

The conflict between Russia and Ukraine in 2022, and subsequent freezing of Russia’s foreign exchange reserves, marked the crossing of a Rubicon. It showed that reserve assets are not purely financial but are subject to political risk. Since then, central banks — particularly in emerging markets — have stepped up their purchases of gold. This has raised questions around the position of the USD as the world’s reserve currency. We do not think there will be a near-term rejection of the dollar — there isn’t a viable alternative yet that could replace the USD —  but an overreliance on any single system or concentrated set of reserves is far riskier today than it has been in the last 70 years.

Recent events reinforce this trend. The ongoing conflict in the Middle East, attacks on shipping in the Red Sea, and the March 2026 closure of the Strait of Hormuz stress the risks to the global energy supply and supply chains. Coming on the back of the Covid supply chain disruptions, then the energy shock in the wake of the Russia/Ukraine conflict, it is clear that the world had been operating in a highly fragile state. Corporates, households, and nations are now looking to build resiliency, and one of the best ways to build resiliency is to diversify.

This erosion of trust is not occurring in isolation; it reflects a broader change in how power, leadership, and security are distributed across the global system.

A world without a clear anchor

Historically, global stability has depended on a dominant power willing and able to provide security, enforce rules, and supply the world’s main currency. For much of the post‑war period, the US fulfilled this role, underpinning a dollar‑centred system that supported decades of global growth. 

Today, the US has been clear that it will not play that role in the same way. Further, China rivals the US economically, and increasingly technologically. Russia, despite economic weakness, remains a major military force. Europe, India, and other middle powers are being forced to seek greater strategic autonomy and take greater responsibility for their own security now.

The result is not a neat shift to a new hegemon, but what we describe as an “unpolar” world — one in which leadership varies by issue and region. Financially, the US still dominates. Militarily, power is shared between the US, China, and Russia. Technologically, the US and China lead, but increasingly in separate spheres, with others lagging. This fragmentation makes cooperation harder, tensions and supply shocks more likely, and crises more difficult to manage. These are not crises a central bank can respond to by cutting interest rates. That means building long-term diversified portfolios needs some rethinking today.

Once again, recent geopolitical developments highlight these strains. There are a growing number of conflicts around the world, global institutions appear less effective, and doubts have grown about the durability of US security guarantees. Markets and policymakers are adjusting accordingly.

For investors of all types, this matters because fragmentation at the geopolitical level increasingly feeds through into financial markets, policy decisions, and asset returns.

Dollar dominance but with rising vulnerabilities

The US dollar remains the world’s unrivalled reserve currency, supported by deep markets, innovation, and strong institutions. Yet its dominance rests on persistent fiscal and external deficits. The US supplies global liquidity by running imbalances that grow larger over time.

Many foreign investors hold exceptionally large claims on US assets, increasingly concentrated in equities and private markets. This has delivered strong returns, but it also creates exposure to US policy choices. Those choices have become far less predictable in recent years — not just under the Trump administration. Broader use of sanctions, greater trade protection, industrial subsidies, and tariffs signal a more unilateral and transactional approach to economic policy. Gold can, and has, provided something of a hedge against this policy risk.

For long‑term investors, this does not spell the end of dollar dominance — but it does mean that concentration risk, even in the world’s strongest system, should be rethought today. 

Gold as a partial alternative

It is in this context — continued dollar dominance alongside rising policy and geopolitical risk — that gold’s role becomes clearer.

Despite frequent talk of “dedollarisation,” there has been no meaningful shift into alternative reserve currencies. Largely because there is no single viable alternative like there was when the UK pound started to lose its status after the end of World War Two.

The euro lacks political and fiscal unity, and depth of its capital markets. China’s renminbi remains constrained by capital controls, and many foreign nations wouldn’t trust holding renminbi even if that weren’t the case.

Gold has the benefit of being physical and can therefore be held within a nation’s borders and outside of the financial system — an important feature when trust is waning. It can sit alongside the USD as a larger position in reserve portfolios, but even with a significant increase in its value, it is still very hard to see gold usurping the dollar.

Gold is not replacing the dollar as the backbone of the system, but it is providing some insurance against a world in which rules are less stable and assets are more exposed to geopolitics.

Rethinking diversification

Gold’s rise is a canary singing that global trust is waning. The environment is becoming more volatile, less predictable, more political, and more fragmented than in the past. As a result, diversification is no longer just prudent — it is becoming a strategic necessity.

For sovereign wealth funds and other long‑horizon investors, the lesson is not alarmist, but it is clear. The US and the dollar are likely to remain central to global finance, yet reliance on any single country, currency, or system carries greater risk than it once did. Gold is not the complete answer, but it is asking the right question. A broader mix of geographies and asset classes is likely to be the more durable response.