By Vivien Lou Chen
‘The dollar’s brand has been tarnished,’ says strategist Marc Chandler, reiterating a theme from April when tariffs shook financial markets
The U.S. dollar has depreciated against major peers over much of 2025, largely as a result of investors’ decisions to hedge their risks against the currency.
The U.S. dollar has weakened over much of the year in a sign of possible threats to its global standing. Meanwhile, gold is having its day in the sun, rising above $4,000 an ounce for the first time on Tuesday and poised for what some analysts think will be levels near $5,000 by the end of 2026.
The U.S. currency’s depreciation against major peers since January has more to do with investors’ willingness to hedge the risks of a depreciating American currency, and less to do with a choice to sell all U.S. assets, according to Marc Chandler, a strategist and managing director at Bannockburn Capital Markets in New York. This distinction is important because it points to a more cyclical reason behind the dollar’s decline, rather than a longer-lasting structural issue.
“I’m not sure the dollar has lost its global standing. To me, the dollar’s brand has been tarnished,” Chandler said, echoing a theme seen in April when tariff-driven volatility dented the dollar, whipsawed stocks and led to a dramatic selloff in U.S. government debt. As of late Tuesday afternoon, the ICE U.S. Dollar Index DXY, a measure of the greenback against a basket of six major peers, was down 9.1% for the year at around 98.6.Read: Collapse of the dollar shows ‘the biggest damage right now is to the U.S. brand’
Gold futures (GC00) (GCZ25) broke above $4,000 per ounce on an array of concerns, including uncertainty over the length and possible economic fallout of the U.S. government’s partial shutdown. Based on the most-active contract, prices are nearly 52% higher for the year, according to Dow Jones Market Data. See also: Why record-high gold prices aren’t scaring away first-time investors
Gold is just one of the ways that investors have been playing the debasement trade, or prospects for further depreciation of the dollar, this year. And the trade in gold has only gained further momentum since the government shutdown started last Wednesday.
“The world came into this year being overweight the U.S. dollar,” Chandler said via phone on Tuesday. “Maybe what we’re seeing is a couple of different drivers. In the earlier part of the year, it was fear that the Trump administration would talk the dollar down to correct the trade imbalance. Then the second phase was tariffs.” He said the third phase that’s unfolding now is linked to the Federal Reserve’s interest-rate-cutting plans.
“There are many companies and countries that don’t have a choice but to trade and borrow in U.S. dollars,” Chandler added. “But they do have the discretion to reduce their dollar exposures by trading more in their own currencies and in gold. And that’s what is happening now.”
Data from the U.S. Treasury Department appears to back up Chandler’s case. It shows that foreign investors bought a net total of $788.2 billion worth of U.S. stocks and bonds during the first seven months of 2025, up from $326.2 billion in 2024 and $555.5 billion in 2023 over comparable periods.
Research released this summer by the Bank for International Settlements also found that non-U.S. investors were hedging the risks of holding U.S. dollar securities, which contributed to the currency’s weakness in April and May.
Though the ICE U.S. Dollar Index was up by 0.5% in late Tuesday afternoon trading, it has generally failed to hold above the 98 level on every rally attempt, said David Morrison, a London-based senior market analyst at financial-services provider Trade Nation. And the government shutdown hasn’t helped sentiment toward the U.S. currency, according to Morrison.
Meanwhile, Goldman Sachs analysts now predict gold could trade near $5,000 an ounce by the end of next year. All three major U.S. stock indexes DJIA SPX COMP finished lower for the day.
Barbara Kollmeyer contributed.
-Vivien Lou Chen
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