Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
UBS recently dubbed the US dollar an “unattractive” asset as the currency faces a ballooning deficit and waning global confidence. The Swiss bank joins ranks with a rising chorus of financial institutions warning about the USD’s troubles.
Meanwhile, gold knocked out the euro as the second most widely held asset in foreign reserves. The yellow metal’s share is rapidly expanding as central banks continue buying at record rates, while the US’s position falls. As governments dump the dollar in favor of foreign currencies and physical gold, UBS is recommending investors follow a similar route.
The Dollar Loses Its Appeal
In a recent note to investors, UBS raised fresh concerns about the dollar’s outlook, questioning its appeal as a reliable investment. The Swiss bank pointed to the greenback’s 10% slide year-to-date, as the US Dollar Index (DXY) hovers near a three-year low.
UBS’s Chief Investment Office (CIO) attributed the greenback’s continued weakness to the country’s towering national debt, persistent federal deficits, and the administration’s harsher-than-expected tariff policies.
Collectively, these macroeconomic headwinds pose “challenges to the USD’s traditional role as a perceived safe-haven asset.” This grim forecast is shared by Deutsche Bank, which predicts the dollar will lose its safe-haven status in the coming years.
The Greenback’s Falling Forecast
According to UBS’s CIO team, the US dollar is poised for a sharp decline in the coming years, driven by four major challenges:
1. Slowing the US Economy
Economic growth is grinding to a halt. In Q1, US GDP contracted by 0.3%, marking the first negative quarter in over two years. While Q2 data hasn’t been released yet, many economists believe the US is already in a recession, typically defined as two consecutive quarters of negative growth.
2. Ballooning National Debt
The national debt has surged to $37 trillion, and the recently passed One Big Beautiful Bill Act is expected to add several trillion more. At the same time, interest payments on the debt are consuming a growing share of the federal budget, making the long-term path to fiscal sustainability even more difficult.
3. Tariff Uncertainty
Ninety days into the administration’s self-imposed trade deadline, only one trade deal has been finalized. With former President Trump signaling steeper tariffs ahead, businesses are left in a fog of uncertainty, a drag on both economic momentum and the dollar’s perceived stability.
UBS Sees the Dollar’s Value Dropping
UBS forecasts continued depreciation of the US dollar against major foreign currencies. Specifically, the bank expects the EUR/USD exchange rate to reach 1.20 by June 2026. In practical terms, that means the dollar could be worth just 80 cents per euro within a year.
In addition to foreign currencies, gold is also expected to gain value relative to the weakening dollar.
In light of this outlook, UBS’s Chief Investment Office advises investors to “use near-term dollar strength to reduce excess US dollar cash by investing or diversifying into other [assets].”
Dollar’s Reserve Shares Slip
One of the clearest signs of the dollar’s declining strength is its shrinking role in global reserve holdings. In less than 25 years, the dollar’s share of official foreign reserves has dropped from 70% to 58%, reflecting both its weakening value and waning global confidence.
At the same time, gold is gaining ground. Central banks have been purchasing over 1,000 tons annually for three consecutive years, a trend UBS expects to continue through 2025.
In a major milestone, gold recently surpassed the euro to become the second-largest reserve asset, now accounting for 20% of global reserves. That eclipses the euro’s 16% position and is steadily closing the gap with the dollar.
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