The Dutch central bank has moved part of its gold reserves out of New York, and Norway’s sovereign wealth fund also plans to reduce its U.S. Treasury holdings. Amid Trump’s policies, geopolitical risks, and U.S. fiscal pressures, central banks worldwide are reassessing the safe-haven appeal of U.S. assets.
Last week, the Dutch central bank decided to repatriate part of its gold reserves from New York, citing geopolitical instability as one of the reasons. Meanwhile, Norway’s $2.4 trillion sovereign wealth fund has proposed reducing its holdings of U.S. Treasuries, lowering the overall allocation to government bonds from 70% to 50%.
These actions occur against the backdrop of the United States' increasingly hardline foreign policy. The Trump administration launched a global tariff war last year, forcibly took control of Venezuela’s leader Maduro in January, initiated a war against Iran in February, and in late August unveiled a plan to take control of over 65 billion barrels of Venezuelan oil.
Meanwhile, relations between the United States and its European and NATO allies have also been strained. The Trump administration has previously expressed ambitions to annex Greenland and its natural resources, and the U.S.-Canada trade war has recently escalated further.
The resulting question is: Is global trust in the U.S. financial system declining?
“It’s more about the irrational behavior of the U.S. president,” said Steven Blitz, Chief U.S. Economist at GlobalData TS Lombard, referring to Trump’s threat last Friday to cut trade with certain countries unless the Federal Reserve significantly cuts interest rates.
Blitz further raised the question: "Who can guarantee he won't suddenly decide that this gold in New York cannot leave the country?"
He believes the likelihood of this scenario occurring is low, but it is reasonable for global central banks to consider potential risks until Trump’s second term ends in January 2029 and U.S. policy becomes clearer.
“Was it prudent for the Dutch central bank to move its gold during this period? The answer is: yes, I can understand that,” Blitz said.
For decades, countries have regarded gold as a reserve asset, used for secure storage and investment, and viewed as a tangible asset convertible into cash. After World War II, an increasing number of nations chose to store their gold reserves in the Federal Reserve Bank of New York’s vaults.
But this tradition is changing. France recently sold its final batch of gold stored in New York, conducted a swap operation, and netted approximately $15 billion; Germany had already completed a large-scale gold transfer during Trump’s first term.
“I think this is more about control than geography,” said Max Baecker, President of American Hartford Gold, a precious metals dealer. “Central banks want to ensure they can access and move their gold when needed.”
A White House official argued that America’s leadership position, established after World War II, remains strong. It was this very position that originally prompted countries to store large amounts of gold at the Federal Reserve Bank of New York.
Behind the gold repatriation, the safety of U.S. dollar assets is being reevaluated.
Beyond gold, U.S. Treasury securities have long been a key reserve asset for central banks worldwide. Since central banks are generally less sensitive to short-term price fluctuations than institutional or individual investors, their sustained presence also helps enhance the attractiveness of the U.S. Treasury market.
According to the latest data from the World Gold Council, the United States holds over 8,000 tons of gold, ranking first globally, followed by Germany, France, and Italy. The Netherlands holds approximately 1,300 tons of gold, accounting for about 55% of its total reserves.
The central bank's reassessment of the location of its gold reserves also follows a significant rise in gold prices. Since the outbreak of the Russia-Ukraine conflict in 2022, gold has remained strong.
According to FactSet data, gold reached a historical high of approximately $5,600 per ounce in January this year, up from around $2,000 four years ago, and is currently trading around $4,477.
“My advice on gold is that holding some doesn’t hurt, especially if it helps you sleep better,” said Jim Baird, Chief Investment Officer at Plante Moran Investment Advisors.
But Baird does not advocate converting all assets into gold and "burying it in the backyard." In his view, despite the U.S. national debt reaching $40 trillion this summer, the old adage "the best house in a bad neighborhood" still holds true.
“Despite all our problems, are there other markets as deep or liquid as the U.S. Treasury market? The answer is no,” said Bair.
Concerns about inflation, driven by the size of U.S. debt and rising oil prices following the conflict in Iran, have already been reflected in the bond market. The benchmark 10-year U.S. Treasury yield rose from 4% at the start of the Middle East conflict in March to approximately 4.8% in September.
If U.S. Treasury yields rise further, risks may continue to expand, including diminished market confidence in the U.S. and the Federal Reserve’s ability to control inflation, ultimately leading to fewer buyers of U.S. Treasuries.
“I’ll watch to see if it breaks through 5% and holds at that level for more than one or two weeks,” said Stephanie Link, Chief Investment Strategist at Hightower Advisors. “That would be an interesting signal.”
The proportion of U.S. Treasuries held by foreign investors has declined, and their safe-haven status is not unshakable.
After the 2008 global financial crisis, foreign holders accounted for nearly 56% of the U.S. Treasury market. However, this share has declined significantly, reaching about 31% last year.
“In the past, when markets became too volatile, people would start asking about buying U.S. Treasuries,” said Bob Edwards, Chief Investment Officer at Edwards Asset Management.
However, since inflation remains an issue, Edwards is currently guiding clients toward "boring" dividend-paying stocks and recommending a reduction in exposure to AI-related assets after their significant rally.
The U.S. government has run large fiscal deficits in recent years, increasing pressure on the long-term bond market. Mike Treacy, Vice President of Risk at Apex Fintech Solutions, noted that one market response has been higher yields on 10-year and 30-year U.S. Treasury bonds.
"As long-term interest rates rise, demand for gold itself will also increase," Trice said.
However, he does not believe that any "fading" of America's financial standing will necessarily be permanent. The U.S. political environment could still change, especially after the November midterm elections.
"The judgment made today could be very different two years from now, or even two months from now," Trice said.
"Geopolitics is cyclical," he added.