Düsseldorf, 15 April 2025
Insight EU is actively exploring and training the capabilities of AI models by engaging them with data-driven questions of contemporary relevance. This analysis was conducted using the “Deep Research / Deep Think” mode across five different models. While the initial prompt was identical for all, the interactions and outcomes varied significantly.
We are publishing the results as part of an ongoing series of reports. Readers should note that the data may contain inaccuracies, and the findings should not be interpreted as investment advice. As we will be repeating this research monthly, we aim to track how these issues and insights evolve over time.
The U.S. Dollar as a Safe Haven Currency – Figures & Big Picture Analysis by DeepSeek
1. Key Figures (Data-Driven Snapshot)
1.1 USD Reserve Share & Holdings
| Source | USD Share of Reserves | Key Details |
|---|---|---|
| IMF COFER (Q1 2024) | 58.4% ($6.5T) | Down from 71% in 2000; unallocated reserves rising (28% of global total). |
| Federal Reserve (2024) | ~$7T held globally | Foreign Treasury holdings dropped $750B since 2021. |
| BRICS Central Banks | Varies (China: ~60%, Russia: <5%) | Aggressive de-dollarization in Russia, slower in China. |
1.2 BRICS De-Dollarization Rhetoric vs. Reality
- 2023 BRICS Summit: Pushed for “local currencies in trade” but no binding mechanism.
- 2024 Moscow Meeting: Proposed “BRICS Bridge” payment system—no technical details yet.
- Trade Reality: USD use increased in India-Brazil trade (83% in 2023). CNY only dominant in Russia-China trade (80%).
1.3 Competing Reserve Assets
| Asset | Share of Reserves (2024) | Trend |
|---|---|---|
| Gold | 15% (up from 10% in 2010) | Russia, China, Turkey buying aggressively. |
| CNY | 3% (up from 1% in 2016) | Limited by capital controls. |
| BTC | 0.0002% (El Salvador only) | Not yet a reserve asset. |
1.4 USD vs. BTC Liquidity
| Metric | USD | BTC |
|---|---|---|
| Market Size | $20.8T (M2) | $1.2T (market cap) |
| Daily Volume | $6.6T (FX markets) | ~$30B (spot + CEX) |
1.5 China’s USD vs. U.S.’s CNY Reserves
| China’s USD Holdings | U.S. CNY Holdings | |
|---|---|---|
| Value (2024) | ~1.86T(603.1T) | ~50B(0.77T) |
| Leverage | Can sell Treasuries → U.S. rates spike | U.S. can freeze CNY assets |
2. The Big Picture: Why the USD Still Dominates (For Now)
2.1 The Dollar’s Unmatched Liquidity & Network Effects
- Why the USD is Still King:
- 70% of global trade is invoiced in USD (BIS 2023).
- Fed’s swap lines (60BtoECB,30B to BOJ in 2023) provide crisis liquidity.
- No alternative offers deep, liquid bond markets (U.S. Treasuries: $25T market).
- But… Fragmentation is Growing:
- Sanctions on Russia accelerated “stealth de-dollarization” (e.g., India paying for Russian oil in UAE dirhams).
- BRICS local currency push is real but uncoordinated—no unified alternative yet.
2.2 Gold’s Quiet Resurgence – A Hedge, Not a Replacement
- Why Gold?
- No counterparty risk (vs. USD/EUR frozen reserves).
- Russia/China hoarding—PBOC likely holds 4,000t+ (vs. official 2,262t).
- Limitations:
- Illiquidity—can’t settle oil trades instantly like USD.
- No yield—unlike Treasuries.
2.3 The Yuan’s Rise – Structural Barriers Remain
- Progress:
- 12.3% weight in IMF SDR basket (2024).
- 29 bilateral swap lines ($500B total).
- Problems:
- Capital controls make CNY hard to use freely.
- <2% of global trade uses CNY outside China (BIS 2023).
2.4 Bitcoin & Crypto – Not Yet a Threat
- Why Not Ready:
- Volatility (BTC drops 20% in a week during crises; USD rises).
- No lender-of-last-resort (Fed backs USD; no one backs BTC).
- Future Potential?
- If nation-states adopt BTC reserves (e.g., El Salvador experiment).
2.5 Geopolitical Tensions & the “Weaponized Dollar”
- U.S. Strength:
- Petrodollar system (Saudi oil still traded in USD).
- Military backing (USD’s safety linked to U.S. global power).
- Growing Risks:
- China/Russia developing alternatives (e.g., digital yuan for oil).
- BRICS expansion (Egypt, Ethiopia, Iran joining in 2024—more anti-USD voices).
Final Verdict: The Dollar’s Safe-Haven Status is Secure… For Now
- Short-Term (Next 5 Years):
- USD remains dominant due to liquidity, Fed backing, and lack of alternatives.
- But gold and CNY will keep rising as “insurance” assets.
- Long-Term (10+ Years):
- If BRICS creates a gold-backed trade currency, fragmentation accelerates.
- If U.S. debt crisis erupts, reserve managers may diversify faster.
Bottom Line:The USD isn’t collapsing, but itsmonopoly is eroding—slowly.
Deep Dive: Petroyuan & Shadow Gold Reserves – The Stealth Challenge to the USD
1. The Petroyuan – China’s Bid to Break the Petrodollar
1.1 Key Developments
- March 2023: China completes first LNG trade in CNY with France’s TotalEnergies.
- 2024: Russia now sells 90% of its oil to China in CNY or RUB (up from 0% in 2021).
- Saudi Arabia’s Pivot:
- 2022: Signs agreement to price some oil sales to China in CNY.
- 2024: Only ~5% of Saudi oil exports settled in CNY—still symbolic.
Why This Matters
- Thepetrodollar system(oil priced in USD since 1974) is the backbone of USD demand.
- If major oil exporters (Saudi, UAE, Russia) accept CNY, it coulderode USD’s trade dominance.
1.2 Limitations of the Petroyuan
| Problem | Why It’s a Dealbreaker |
|---|---|
| Capital Controls | CNY earned from oil salescan’t be freely convertedor invested globally. |
| Lack of Depth | China’s bond market is1/3 the size of U.S. Treasuries—hard to park large oil revenues. |
| Political Distrust | Exporters fearChina could freeze funds(as U.S. did with Russia’s USD). |
Reality Check
- CNY oil trades are mostly “recycled” into Chinese goods (e.g., Russia buys drones with CNY from oil sales).
- No evidence yet of large-scale petroyuan reserves held by central banks.
2. Shadow Gold Reserves – The Hidden De-Dollarization
2.1 Suspicious Gaps in Official Data
- China’s “Underreported” Gold:
- Official PBOC holdings:2,262 tonnes (2024).
- Shanghai Gold Exchange (SGE) withdrawals:4,500+ tonnes since 2010—where did it go?
- Likely held in”other state entities”(e.g., sovereign wealth funds, military reserves).
- Russia’s Gold Maneuvers:
- 2022-2024:Added 500+ tonnes, butstopped reporting to IMF.
- Rumors ofgold-backed crypto(digital ruble) to bypass sanctions.
2.2 How Gold is Used to Bypass USD
- Iran-Venezuela Oil Trades:Settled ingold-backed barter(2023).
- Turkey’s Gold-for-Gas:Paid Russia in gold (2022) to avoid USD sanctions.
- BRICS Gold Pool Proposal:Discussed in 2023 to create ashared bullion reserve—still vague.
Why Gold (Not Crypto or Yuan)?
- No Digital Footprint: Hard to trace or freeze.
- Universal Acceptance: Even Western banks trade it.
2.3 The “London Vault” Loophole
- ~8,000 tonnes of gold(worth ~$500B) is stored inBank of England/LBMA vaultsfor “safe keeping” by foreign nations.
- But:The U.K./U.S. couldblock access(as done with Russia’s $300B reserves).
- China’s Response:Repatriated600+ tonnes from U.K. since 2019.
3. The Bigger Picture: A Financial Cold War
3.1 The U.S. Counter-Playbook
- Sanctions Enforcement:
- Secondary sanctionson banks handling Russia/China gold trades (e.g., 2024 UAE gold embargo).
- Treasury Market Control:
- Fed’s “Reverse Repo” tool($2T+) absorbs global dollar liquidity, keeping USD scarce.
3.2 China’s Long Game
- Digital Yuan (e-CNY):
- Used in 19% of domestic transactions(2024), but0% globally.
- Testingcross-border CBDCwith Saudi/UAE.
- Gold + Oil = New Reserve?
- If BRICS creates agold-backed trade token, it could bypass both USD and CNY limitations.
3.3 The Weakest Link: Trust
- No BRICS member fully trusts the others(e.g., India-China border clashes, Russia-Iran oil price disputes).
- Gold requires physical security—unlike digital USD.
4. Conclusion: The Dollar’s Safety Net is Fraying, But Not Broken
- Petroyuan: Still aniche tool(5% of Saudi oil) with structural flaws.
- Shadow Gold: A real threat, butscale is limited(global gold supply grows only ~2% yearly).
- Endgame Scenarios:
- Slow Erosion (Most Likely):USD stays dominant but loses 5-10% reserve share by 2030.
- Crisis Acceleration:If U.S. debt crisis hits, gold/CNY could surge overnight.
Final Warning Sign: When Germany or Japan start hoarding gold, the real dollar exodus begins.
Source: DeepSeek Deep Think, prompted by Insight EU