Insight Canary in the Gold Mine, II: The Future of Global Money

The future of the dollar-centric system

Our white paper Canary in the gold Mine, II: The future of global money, examines what caused gold to hit record highs in 2026 while US stocks and bonds traded buoyantly. The dollar was soft but not collapsing. Taken together, these signals tell a story sovereign investors should pay close attention to.

In our earlier piece, Rethinking asset management in a changing world order, we argued that the familiar investment playbook is being stress-tested, what has been considered as "risk-free" is increasingly contextual, diversification is harder, and passive allocations can embed large, hidden active bets. In this context, "risk-free" refers to assets traditionally viewed as having minimal credit risk, such as government bonds, rather than investments that are completely free of risk. This white paper builds on those themes by looking more closely at the currency system underpinning them.

Gold is the early warning

Our title borrows from an old mining expression. Miners sent canaries underground to detect toxic gas in coal mines. We see the gold rally as a similar signal, pointing to growing stress in the dollar-centric financial system.

In the first edition of our white paper, The canary in the gold mine: rethinking the global order, we argued that gold's rise reflects something broader than a bet against the dollar: it signals that trust in the global system itself is eroding, driven by geopolitical rivalry, trade barriers and the increasing use of financial sanctions. The 2022 freezing of Russia's reserves crossed a Rubicon, showing reserve assets carry political risk in ways not tested for decades. Part 2 of this story picks up where that piece left off, examining how that erosion is playing out across the three functions of money: store of value, means of payment, and unit of account.

Since the global financial crisis, gold has been on a secular upswing. It accelerated after Russia's invasion of Ukraine and moved sharply higher again after the return of the current US administration and the tariff shock of April 2025.

Central banks have been at the centre of this buying. Annual purchases have exceeded 1,000 tonnes every year since 2022, possibly interrupted only at the start of 2026, as some sought liquidity amid an energy shock. Much of the buying comes from emerging market central banks, particularly China, though a significant share is unreported. Eastern European central banks, including Poland and Hungary, have also been active buyers, citing national security and protection of value.

Private investors began to follow in 2025. Gold ETF inflows that year were the highest on record, concentrated in North America and Asia. Buying initially tracked tariff headlines, but as a panel discussion at our October 2025 sovereign investment programme (ISIP) event made clear, investors have since moved beyond reacting to individual headlines, they are buying gold as a structural hedge.

The message was consistent: When trust is under strain, gold is the preferred hedge. Not the euro. Not the renminbi. Gold.

The dollar's position: Still dominant, but the risks are shifting

For all the talk of de-dollarisation, the dollar remains the anchor of the international monetary system. No other currency comes close in market depth, liquidity, or global reach. That is unlikely to change materially soon.

The dollar accounts for roughly half of all international payments over SWIFT. Add the euro and the share reaches about three-quarters. The renminbi, despite China's economic weight, still sits below 5%.

The euro's role is somewhat overstated. Intra-eurozone trade is counted as international in these figures, which inflates its apparent global share. Europe also participated in freezing Russian reserves, which limits its appeal as a neutral alternative.

The constraints on diversification are therefore real. Alternatives are smaller, less liquid, and carry their own political risks. China maintains extensive capital controls. Europe's bond markets remain fragmented across separate fiscal policies and credit profiles.

As we described in Rethinking the Global Order, the world no longer has a clear anchor. The US still dominates financially, but power is distributed differently across economics, technology, and military capability. For dollar portfolios, the source of risk is no longer primarily economic it is increasingly political and structural.

The risks around the dollar are shifting in ways that matter:

• Legal and sanctions risk. Tariff policies and broader unconventional US policy in 2025 have countries, even those with good relationships with the US thinking more carefully about tail scenarios. At our 2025 ISIP panel, central bankers from several countries, highlighted different but related concerns. These ranged from managing potential asset-freeze risk through synthetic dollar exposure - investing in short term assets in other jurisdictions and hedging back to the USD, thus keeping economic exposure, while reducing legal exposure. We also heard that some countries were focused on dollar depreciation, and considering a forward hedging programme.
• Market risk. The administration's stated desire to weaken the dollar, combined with large fiscal deficits and pressure on institutional independence, creates a different kind of exposure. If the US becomes more nationalistic and less open, the premium global investors have placed on US assets could erode.

"Risk-free" is increasingly defined by liquidity, legal clarity, and instrument choice not just by issuer. When sovereign investors separate issuer risk from sanctions risk, it changes how dollar-denominated exposure is structured, even before any reallocation away from the dollar itself.

Stablecoins: The development to watch

The most forward-looking part of this research is the analysis of US dollar stablecoins.

The distinction between stablecoins and central bank digital currencies matters (CBDCs). CBDCs are government-led, slow to develop and constrained by legislation. The European Central Bank has worked on a digital euro for years; legislation is still not in place. The Federal Reserve rejected a CBDC, choosing instead to support private stablecoins.

Stablecoins are market-driven, faster to deploy and more versatile. The GENIUS Act, passed in July 2025, authorises privately issued USD stablecoins backed 100% by US Treasury bills, with Federal Reserve oversight.

The numbers are still small around $300 billion in total market capitalisation in early 2026, but the growth rate is rapid and almost all of it is denominated in US dollars. The market is telling us something: People want dollars. But they may not always want the US banking system that comes with them.

Stablecoins offer the possibility of holding and transacting in dollars without direct exposure to the US financial system. Sanctioned or at-risk countries are already exploring this. Kyrgyzstan has announced plans for a USD stablecoin backed by $300 million of gold in its central bank reserves.

A telling anecdote from the panel illustrates the point. When Russia began selling large volumes of oil to India, the trade became heavily unbalanced. Russia accumulated Indian rupees it could not easily use and asked for Chinese yuan instead India could not supply them. The workaround was settlement in UAE dirham, a currency pegged to the dollar. 

Stablecoins could formalize that workaround at scale. Senior US officials have indicated they expect stablecoins to help preserve the dollar's anchor role while creating additional demand for US Treasury debt.

Where this leaves sovereign investors

We are likely entering a multi-currency world in which the dollar remains first among equals. US market depth and the momentum behind USD stablecoins give the dollar advantages other currencies cannot easily replicate.

But the world is also becoming more fragmented. Geopolitical rivalry, financial sanctions, more frequent kinetic conflict, and the weaponisation of economic infrastructure are driving countries to build parallel systems and hedge their exposures. Gold is the most visible expression, and we expect demand to remain strong.

For sovereign investors, these are the practical implications:

• Dollar concentration carries risks it did not a decade ago both market risk and, for some, legal risk.
• Gold allocations are likely to keep rising across official and private portfolios.
• Stablecoins and digital currency infrastructure could reshape how sovereign reserves interact with the dollar system.
• Alternatives to the dollar remain limited, making diversification a constrained problem, not a simple reallocation.

As we concluded in Rethinking the global order, gold is not the complete answer, but it is asking the right question. A broader mix of geographies, asset classes, and as our latest white paper on this topic argues, currency structures are likely to be the more durable response. In a more fragmented currency world, the vehicle, jurisdiction, and instrument matter as much as the asset class label. Getting the structure right is part of the investment decision, not an afterthought.

The data suggest an inflection point, not a breaking point. The dollar-centric system is adapting, not collapsing. The open question is how and what role sovereign investors choose to play in that process.

I encourage you to read the full white paper, Canary in the gold mine, II: The future of global money for the detailed analysis. If these themes resonate with your own portfolio discussions, we would welcome the conversation.