Gold Price Recovers $4,000... Is the Dollar's Status as a Reserve Currency Shaking Amid U.S. Debt Fears?

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Gold, which has regained the $4,000 mark, is holding steady amidst the U.S. Federal Reserve's (Fed) monetary policy vigilance. Central banks and sovereign wealth funds, concerned about U.S. government debt, are showing signs of increasing their gold holdings.

According to FXLeaders, a foreign exchange market specialized media outlet, on July 5 (local time), gold prices recovered the psychological support level of $4,000 with the start of the second half of 2026. Although U.S. Treasury yields rose, the weaker dollar offset the interest rate burden, supporting gold prices. Hopes for diplomatic efforts between the U.S. and Iran weakened demand for safe-haven assets, but uncertainties surrounding future negotiations and the Middle East situation sustained demand for defensive assets.

Market attention is shifting to U.S. economic indicators and the Federal Open Market Committee (FOMC) minutes. The Fed, in its recent meeting, kept interest rates unchanged while raising inflation forecasts and signaling that rates could remain high for an extended period. As prospects for future rate cuts have also diminished, the media analyzed that if a stronger hawkish stance is confirmed in the FOMC minutes or if U.S. economic indicators are stronger than expected, dollar strength and gold selling pressure could intensify again.

Technically, the $4,000 support level was identified as a watershed for short-term trends. Gold fell below its 50-day simple moving average and the 100-day moving average near $5,000 during a multi-month decline, dropping to $3,942 last week. It later rebounded to close above $4,100, but on the weekly chart, it remained below the 50-week moving average. FXLeaders assessed that the defense of $4,000 is a sign that buying interest is still active in the long-term support zone.

The pillars supporting long-term demand for gold are central banks and sovereign wealth funds. A survey by Invesco of 90 sovereign wealth funds managing a total of $29 trillion in assets and 54 central banks found that approximately one-third plan to increase their gold holdings. 61% of central bank respondents believed that the increase in U.S. government debt is undermining the dollar's long-term reserve currency status. This is a significant increase from 20% in the 2024 survey.

29% of respondents predicted that the dollar's role as a reserve currency would weaken over the next five years. Some central banks are even re-evaluating their reliance on U.S.-based custodians, counterparties, and clearing systems, considering geopolitical uncertainties. FXLeaders analyzed that as central banks and sovereign wealth funds manage assets over the long term and are relatively less sensitive to price fluctuations, sustained public sector demand could provide a long-term support base for gold prices.

[Key Summary of the Article]

-Gold prices recovered the psychological support level of $4,000, driven by a weaker dollar, and the market is watching the FOMC minutes.

-In an Invesco survey, 61% of central bank respondents said that the increase in U.S. government debt undermines the dollar's long-term reserve currency status.

-Approximately one-third of sovereign wealth funds and central banks plan to increase their gold holdings, once again focusing on gold as a strategic reserve asset.

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