The Bretton Woods Agreement in 1944 established the dollar as the centerpiece of the global financial system, after major currencies were linked to it, while the dollar remained linked to gold at a price of $35 per ounce, which strengthened American economic superiority after World War II.
But this system ended in 1971 when US President Richard Nixon abolished the dollar’s peg to gold, giving the Federal Reserve greater flexibility in managing monetary policy, in exchange for opening the door to expanding the money supply and increasing borrowing through Treasury bonds.
To compensate for abandoning the gold standard, Washington moved to boost global demand for the dollar by pricing oil with it, which consolidated its dominance over international trade for decades. However, this dominance began to face increasing challenges, most notably China’s launch of the “petro-yuan” backed by gold in 2018 to compete with the dollar in the energy market.
In recent years, an increasing trend has emerged towards “abandoning dollarization,” as surveys including central banks and sovereign funds showed a trend to reduce the share of the dollar in monetary reserves in favor of the euro, the yuan, and gold, amid fears of rising US debt, trade policies, and geopolitical tensions.
Also, recent studies revealed that financial institutions managing assets exceeding $29 trillion are seeking to diversify their investments and reduce dependence on dollar assets, at a time when US debt exceeded $39 trillion by the end of June 2026, with expectations that it will continue to rise.
For his part, oil expert Mamdouh Salama believes that the dollar has already entered a phase of gradual decline, considering that the American currency will not maintain its position as the world’s first reserve currency for a long time, and that it may face a fate similar to the pound sterling in the future, which lost its dominance with the rise of the United States.
Salama attributes this transformation to several factors, most notably the trend of an increasing number of countries and central banks to diversify their reserves and rely more on the euro, the yuan, and gold, in addition to the growing economic strength of China, and the decline in confidence in dollar assets as a result of the continuing rise in American debt.
He also warned that the escalating cost of servicing this debt and military spending may increase pressure on the dollar in the coming years, even though it has so far maintained its position as the most important reserve currency in the world.
