For decades, the US dollar has dominated global trade and commodity markets. Most commodities, including crude oil, natural gas, gold, industrial metals, and agricultural products, are priced and traded in dollars. However, rising geopolitical tensions, sanctions-related concerns, and the desire of emerging economies to diversify their reserves have encouraged countries to look for alternatives.
Although the dollar remains the world’s leading reserve currency, a gradual shift toward local-currency trade and reserve diversification could influence commodity prices, investment flows, and global trade patterns.
Why Are Countries Supporting De-dollarisation?
One of the biggest advantages of de-dollarisation is reduced dependence on a single currency. Countries can lower their exposure to dollar shortages and exchange-rate fluctuations by conducting trade in their own currencies.
Using local currencies can also reduce transaction and hedging costs, making international trade more efficient. Another important benefit is greater financial sovereignty. Countries heavily dependent on the dollar-based financial system may be vulnerable to sanctions or policy decisions taken outside their control.
In addition, central banks are increasingly diversifying their reserves by holding more gold and other currencies, helping reduce concentration risk.
Impact on Commodity Markets
De-dollarisation could bring both opportunities and challenges to commodity markets. On the positive side, local-currency trade can reduce dependence on the dollar and insulate commodity-importing countries from sharp currency fluctuations. It may also make trade more flexible during periods of financial stress.However, moving away from a common settlement currency could increase market fragmentation and create greater currency-related volatility. Pricing and settlement across multiple currencies may also add complexity to global trade.
Gold: The Biggest Beneficiary
Among all commodities, gold is likely to benefit the most from de-dollarisation. As countries diversify reserves away from dollar-denominated assets, many central banks have increased their gold holdings. Gold is viewed as a neutral reserve asset that is not tied to any country’s monetary policy.
According to the World Gold Council, central banks purchased a record 1,136 tonnes of gold in 2022, followed by 1,051 tonnes in 2023 and 1,045 tonnes in 2024. Even in 2025, purchases remained strong at 863 tonnes, far above the long-term annual average of 473 tonnes recorded between 2010 and 2021. This sustained buying has become a major support factor for gold prices and could continue if reserve diversification accelerates.
Can the Dollar Be Replaced?
A complete replacement of the US dollar appears unlikely in the near future. The dollar remains the dominant global currency because of the size of the US economy, deep financial markets, and investor confidence in US assets.
Nevertheless, a gradual decline in its dominance is possible as more countries adopt local-currency trade arrangements and diversify their reserves. The United States is unlikely to favour any move that weakens the dollar’s global role, but it cannot prevent sovereign nations from choosing alternative settlement methods.
If de-dollarisation gains momentum, gold demand could remain strong and the influence of US monetary policy on global commodity markets may gradually diminish. At the same time, increased use of multiple currencies could lead to higher volatility in international trade.
India’s Position
India has adopted a balanced and pragmatic approach toward de-dollarisation. The country supports the use of the rupee in bilateral trade and encourages local-currency settlements where practical. At the same time, India has not advocated replacing the US dollar. Given its strong economic ties with both the United States and emerging economies, India’s focus is on reducing transaction costs, improving trade efficiency, and strengthening financial resilience without disrupting access to global financial markets.
De-dollarisation is not about replacing the US dollar overnight. Instead, it represents a gradual move toward a more diversified global monetary system. While its impact on most commodities may be mixed, gold stands out as a clear beneficiary due to rising central bank demand. Although the dollar is likely to remain dominant for years to come, growing local-currency trade and reserve diversification could slowly reshape the future of global trade and commodity markets.
(The author is Head of Commodity Research, Geojit Investments )
