JPMorgan Warns De-Dollarization Gains Momentum as USD Share in Reserves Drops to 20-Year Low

JPMorgan Chase has issued a warning that de-dollarization is gaining momentum, as central banks around the world are reducing their holdings of U.S. dollars and increasing their gold reserves. Meera Chandan, co-head of Global FX Strategy at JPMorgan, highlighted that the share of USD in central bank reserves has fallen to below 60%, marking a two-decade low. This shift is particularly evident in the gold market, where competitor economies have been aggressively purchasing gold.

The trend of de-dollarization is most pronounced in the demand for gold, which is seen as a viable alternative to heavily indebted fiat currencies. Emerging market central banks have been the largest buyers of gold over the past decade. While the share of gold in the foreign exchange reserves of emerging markets remains relatively low at 9%, this figure is more than double what it was a decade ago. In contrast, developed market countries hold a much larger share of gold in their reserves, at 20%. This increased demand for gold has contributed to the current bull market in gold, with prices expected to rise toward $4,000 per ounce by mid-2026.

JPMorgan also noted signs of de-dollarization in the bond markets, where the share of foreign ownership in the U.S. Treasury market has been declining for 15 years. As of early 2025, the share of Treasuries owned by foreign entities has dropped to 30%, down from its peak of 50% during the Great Financial Crisis. Jay Barry, head of Global Rates Strategy at JPMorgan, cautioned that any significant foreign selling of Treasuries could drive yields higher, given that Japan alone holds more than $1.1 trillion in Treasuries, or nearly 4% of the market.

The analyst pointed out that the dollar’s share in foreign exchange reserves was lower in the early 1990s, indicating that the current move toward other currencies is significant but not unprecedented. This shift reflects a broader trend of central banks diversifying their reserves away from the U.S. dollar, driven by geopolitical tensions and economic considerations. The trend underscores the growing importance of gold as a safe-haven asset and the potential for further de-dollarization in the global financial system.