US Dollar Value Is Plummeting — What Does This Mean for You?

For more than 80 years, the U.S. dollar has been the gold standard, so to speak, for the world’s economy . Oil and other commodities are priced in dollars and, according to the International Monetary Fund Currency Composition of Foreign Exchange Reserves, the U.S. dollar made up 58.36% of global foreign exchange reserves in the fourth quarter of 2022.

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Even so, the dollar showed an 8% decline in global reserves last year, leaving many to wonder if the dollar will cease to be the currency of the global economy at some point in the future. However, in a congressional hearing, Treasury Secretary Janet Yellen said that it won’t be easy to displace the dollar as the currency standard.

“The dollar plays the role it does in the world financial system for very good reasons that no other country is able to replicate, including China,” she said during the hearing. “We have deep liquid open financial markets, strong rule of law and an absence of capital controls that no country is able to replicate.”

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However, she also admitted that “the dollar’s share of global reserves may continue to decline as countries look to diversify.” She added, “We should expect over time a gradually increased share of other assets in reserve holdings of countries — a natural desire to diversify. But the dollar is far and away the dominant reserve asset.”

As the U.S. continues to battle inflation, the value of the dollar could drop even further if it loses dominance in global markets. Experts recommend hedging against inflation by investing in gold , which has maintained its purchasing power over decades.

Moneywise reported that the U.S. dollar has lost 98% of its purchasing power since 1971, but gold has maintained its value.

If you’d prefer not to invest in gold bullion, which has unique challenges when it comes to storing and insuring the precious metal, consider a Gold IRA. This individual retirement account puts your money into gold coins and bullion — without the storage headaches.

You can also invest in gold ETFs or gold mining stocks as part of a diversified portfolio.

This article originally appeared on GOBankingRates.com : US Dollar Value Is Plummeting — What Does This Mean for You?