Dollar's Reserve Status Under Threat as Triffin Dilemma Looms

The Triffin dilemma is a problem that arises when a country's currency serves as the world's reserve currency. This means the country must run deficits to supply its currency globally, which can erode confidence in the currency over time.

Economist Robert Triffin first identified this issue in 1960 and warned that the dollar's fixed gold peg would not be sustainable due to the growing pile of dollars held overseas.

Triffin was proven correct when Nixon closed the gold window in 1971. Today, the U.S. current account deficit reached $226.8 billion in Q1 2026 alone, and the dollar's reserve share has declined from around 71% in 2000 to 57.13% in Q1 2026.

Central banks have been buying gold at an accelerated pace since 2022, purchasing over 800 tonnes per year. The Triffin dilemma cannot be resolved within the current system and can only be addressed through a gradual loss of reserve status or a new arrangement that involves gold reclaiming its role as a store of value.