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The US dollar has long enjoyed preeminence as a symbol of American strength and financial stability. Yet, some analysts suggest that a new era may be unfolding—one in which the greenback is no longer the world’s reserve asset of choice. Marc Chandler, Chief Market Strategist at Bannockburn Capital Markets, author, and widely followed commentator, offers insight into the future trajectory of the dollar, the renewed appeal of gold, and the impact of America’s push to reindustrialize.

The Dollar’s Supercycle Is Over: What Comes Next?

Chandler’s central view: The US dollar may have already peaked and could see further declines. He points to the dollar index (a basket of major global currencies), which, after hitting a high in 2022, has since started to decline. “This year’s decline is only a small down payment of what we’re going to see,” Chandler believes.

Why the bearish outlook? Chandler leans on a simple but powerful tool: the OECD’s purchasing power parity (PPP) model. It’s the same logic behind The Economist’s famous Big Mac Index—comparing the cost of common goods across countries. According to Chandler, the dollar is still overvalued compared to currencies like the euro and the yen. This, he says, suggests a possible mean reversion—where currency values could move back toward fair value over time.

The main trigger? Interest rates. While the Federal Reserve has been slow to cut, other central banks have already moved. “There’s probably more room for the Fed to cut than in other major countries,” Chandler notes. As US rates fall, he believes the dollar’s relative advantage will shrink, setting up another leg down.

Gold and the Crisis of Confidence in the US Dollar

As the dollar loses ground, global investors appear to be turning increasingly to gold rather than other currencies. Recent data highlights that foreign central banks are now holding more gold than US Treasuries, with Treasury holdings declining since around 2015–2016 while gold reserves have surged.

Source: Bloomberg, Tavi Costa

Chandler explained this trend by highlighting the influence of valuation changes and policy uncertainty. He noted that gold’s rising value has boosted its share of global reserves, while central banks have been actively increasing their gold holdings. He also pointed out that moves like freezing Russian reserves and imposing tariffs on key trading partners have raised concerns about the US dollar’s long-term credibility as a stable, neutral reserve asset.

Chandler believes this environment has led many countries to reduce their discretionary dollar exposure. “I think that, to me, this is one of the largest costs … we’re undermining our own brand trustworthiness.” Still, he cautioned against the assumption that gold could fully replace the dollar’s role in the global system, noting, “It might help on the margins; it might help central banks diversify a little away from the unknowns of the US Treasury market. But I don’t really think it’s a real solution to our general public problem.”

Observing Market Shifts: From the Mag 7 to the Shiny 7

Though the financial media continues to focus heavily on the “Mag 7” tech giants, there has been a notable increase in attention to mining and commodity companies—sometimes referred to as the “Shiny 7”.

Chandler has shifted some of his portfolio exposure since COVID, increasing allocations to gold, rare earths, and uranium producers, based on his own macro views. He emphasized the importance of developing big-picture themes and then expressing those through upstream and downstream investments—such as rare earth miners and infrastructure companies—rather than concentrating solely on technology names.

Following the pandemic and the substantial injection of liquidity through monetary and fiscal measures, notable strategists anticipated rising inflation and increased their allocations to precious metals (see Zero-Bound: The Return of Inflation, April 2020). This strategy has generally reflected broader developments in the market, with metals commodity-related investments attracting heightened attention in recent years.

Industrial Policy, Tariffs, and the Future of American Industry

Recent discussions on US industrial policy often center around three main pillars: protectionist tariffs, strategic investment in key sectors, and a weaker dollar. These elements now appear to be a consistent feature of US policy, with bipartisan support for tariffs, government backing for critical industries, and the prospect of a lower dollar as outlined by Chandler.

Chandler agrees that reindustrialization seems likely, especially after the pandemic exposed American dependence on foreign suppliers for essential goods. “We’re going to be bringing back industrial manufacturing capability in the US. I think that’s almost inevitable,” he asserts. However, he cautions that the return of manufacturing does not necessarily mean a resurgence in manufacturing jobs, given the increasing role of automation and robotics.

On the subject of strategic investment, Chandler expresses skepticism about government involvement and its execution, especially when it comes to specific government stakes in companies. He raises the question: Do US citizens truly benefit from government equity in firms like Intel, or do the companies themselves reap more of the rewards? He emphasizes the importance of transparency and accountability in the application of industrial policy.

Where Does It All Lead?

Marc Chandler’s message is nuanced and thought-provoking. The dollar’s era of effortless dominance may be waning. Gold and commodities are attracting renewed attention. America is reindustrializing—but not necessarily in ways that will bring back traditional jobs.

As the economic landscape evolves, Chandler encourages investors and citizens to consider the broader supply chain and technology changes underway: Where will you fit in a world of shifting supply chains, a changing dollar, and increasing automation?

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