VanEck has published a study examining a significant hypothetical scenario: what would happen to the price of gold if the U.S. dollar were to lose its status as the world's primary reserve currency?
The methodology employed in this study is not based on technical analysis or price predictions. Instead, it relies on balance-sheet calculations. The VanEck team compared central bank money liabilities with official gold reserves to estimate the potential price of gold if it were to reassume its role as the primary monetary anchor.
The resulting figures are striking. When using narrow money (M0) adjusted for foreign exchange turnover, the implied price for gold reaches approximately $39,000 per ounce. If broader money measures (M2) are considered, this figure increases substantially. VanEck explicitly states that this analysis is not a forecast but rather a stress test of the global monetary system.
Why VanEck Considers This Analysis Important
The core of this argument lies in confidence. Reserve currencies function effectively as long as there is global belief in their stability and value. VanEck points out that this confidence has been gradually diminishing over time. A significant event that accelerated this erosion was the freezing of Russia's foreign exchange reserves through sanctions, which altered how many nations perceive their dependence on the U.S. dollar.
Following this event, central banks have accelerated their gold purchases. This increased acquisition of gold is motivated by a desire for protection rather than speculation. Gold possesses no counterparty risk, meaning it is not subject to the default of another party, and it cannot be seized or frozen by a foreign government.
VanEck's analytical framework suggests that many countries are more financially leveraged than their public figures might indicate. Some nations, such as Kazakhstan and Russia, already possess sufficient gold reserves to back their narrow money supply at prices near current market levels. In contrast, other countries, including Japan and the United Kingdom, would require significantly higher gold prices to achieve comparable coverage.
Gold at $4,600 Already Appears Extreme
It is important to consider the current market context. Gold is already trading around the $4,600 mark, which is an unusual level. Gold prices have rarely experienced such rapid increases in a short period without a concurrent major global crisis.
From a market dynamics perspective, such significant price movements often lead to periods of cooling, pullbacks, or extended consolidation phases. It would be unrealistic to expect gold to surge from $4,600 to $39,000 within a brief timeframe.
Historically, gold has undergone price revaluations slowly. Substantial price shifts tend to unfold over years, rather than months.
A Long-Term Scenario, Not a Short-Term Prediction
VanEck's analysis is best understood as a long-term thought experiment. If the global financial system were to gradually transition away from the U.S. dollar over the next decade, gold could indeed be revalued at a much higher price than is currently anticipated by most market participants.
A price increase approaching tenfold from current levels would not be driven solely by speculative activity. It would necessitate fundamental structural changes, sustained accumulation of gold by central banks, and a clear global shift in how international reserves are held.
The hypothetical price of $39,000 per ounce for gold serves as a stark reminder of the potential strain on the current global monetary system should confidence in the U.S. dollar continue to wane.
At its present valuation, gold already reflects a growing level of global uncertainty. A substantially higher price would signify something more profound: a slow but significant alteration in the fundamental ways the world measures value and trust.
For the present, VanEck's research should be interpreted as a cautionary analysis rather than a precise price target.