Gold reached new highs in the lead-up to Donald Trump’s tariffs announcement yesterday. Though it has now slipped just below $3,100 an ounce, its rapid rise this week forced analysts to revise their target prices. Had gold been bought at the turn of the millennium, the investment would have increased 12 times over during the interim — three times the increase of the US stock market in that same period, and twice the return in New York real estate.

You have to go back half a century to see gold behaving this wildly. What is going on is pretty clear: amid rising geopolitical uncertainty and risks of a global trade war, investors and central banks alike are stockpiling gold, the most ancient safe port in a storm. But just why they are doing this is the more intriguing question.

A common explanation is that gold has become a safeguard against inflation and currency debasement. However, gold didn’t move all that much during the pandemic surge in prices, and it only really took off once inflation had come back down. As for debasement, since 2008 the most successful hedge against currency debasement — in fact, an invention created expressly to exploit debasement — has been Bitcoin. Yet since the start of the year it has floundered, despite Trump’s patronage. The price of gold against Bitcoin is now rising, which suggests investors may be losing faith in crypto as well.

This could point to the reason for the turn to gold, particularly among central banks: its rise may be the flip side of the dollar’s decline. Its 20% increase since the start of the year would, if annualised, amount to a near-doubling, but the precious metal has been more restrained against other world currencies such as the euro and the yen.

That’s because against a basket of global currencies, the dollar is down some 6% since the start of the year. It may be that the high degree of volatility and arbitrariness which Trump has injected into the world economy is causing foreigners to tiptoe to the exits. Equally, his backing of crypto and pledge to create a Bitcoin reserve may have turned the digital currency from a perceived alternative to the dollar into something intertwined with it. As the dollar’s appeal has waned, so perhaps has Bitcoin’s.

If there is such a trend against the dollar, Trump didn’t start it. Hesitancy about the currency predates him, and it didn’t feature prominently in his first term of office. Nevertheless, his second administration may be accelerating the emerging tendency. The increasing weaponisation of the dollar in sanctions regimes in recent years, which has now been joined by his team’s talk of dubious schemes such as the Mar-a-Lago Accord, may be souring the world on the US currency.

All told, we may be in the very early stages of the search for alternative reserve currencies, as it appears that central banks are selling some of their dollar assets and parking the receipts in gold. The metal has always played a role in global currency reserves, and it may now be a stop on the route to other stores of value. Because no other economy has the open financial system and deep pools of capital the US has, there is no obvious replacement to the dollar as the world’s reserve currency — at least not yet.

That doesn’t mean, however, that the search for alternatives hasn’t begun. And if so, given the volume of foreign money tied up in US stocks and bonds, America could be in for a painful economic future.

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John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).

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China is trying to catch up with America on artificial intelligence. The Wall Street Journal has reported that Zhipu AI — one of China’s six “AI tiger” LLMs — has released a new model that can rival leading US systems, including Anthropic’s Mythos, in cybersecurity tasks such as pinpointing security bugs. While this marks a milestone in China’s drive to catch up with Western AI capabilities, strong performance on a single benchmark does not mean it has taken the lead. Chinese models still lag behind their Western counterparts in broader capabilities, such as autonomous operation. Skepticism is therefore warranted before resorting to hysterical conclusions, but complacency about the geopolitical implications of China’s AI advances would be an even greater mistake.

On the infrastructure side, Chinese AI is still constrained by access to advanced chips, with American labs way ahead in computing capacity as well as investment. Analysis from earlier this year suggests that Chinese models are likely to be at least a few months behind those in the US. But they are still continuing to make progress, or that the geopolitical importance of AI will be decided only by whose LLM has ventured deeper into the technological frontier. The practical applications of AI, countries’ to capture foreign markets, and the application of AI into the real economy will matter just as much.

Here, China may hold an advantage. As with its dominance across many critical supply chains, Beijing may not need to produce the most advanced AI systems — only those that are affordable and widely deployable. In doing so, it could consolidate global influence by supplying functional, low-cost AI at scale.

Beijing seems to be pursuing exactly that path, developing an AI “open-source” strategy that offers affordable, widely available AI models for companies and individuals to use and modify as they wish. The production of the DeepSeek AI model, which matched the performance of Silicon Valley tools such as ChatGPT at a fraction of the cost for users, created goodwill among Chinese models with developers.

The four most popular models on OpenRouter, an AI hardware platform for developers, are now all Chinese. The goal for China is not only to win the frontier-model race, but to make its systems the default layer of AI adoption across industries and global markets. For most economies, the choice is increasingly between an affordable tool they can deploy now and a more robust one that may be out of reach.

And while the countries adopting Chinese models may be exposed to political pressure and cyber threats from Beijing, safer and more capable alternatives matter little if they are unaffordable. American AI companies are already under pressure to monetize products whose operating costs are rising. If Chinese open-source models become the cheap default for startups, universities, governments and businesses across the developing world, then America’s AI lead will be eroded from below.

Perhaps more concerning for America in the long run is how AI can give Chinese manufacturing even more strength, through the ongoing integration of AI as a general-purpose technology. China’s new Five-Year Plan mentioned AI more than 50 times and includes an “AI+” action plan aimed at spreading AI across the economy.

Beijing has been pioneering automation of its critical infrastructure for years, with promising recent results in increasing warplane production capacity. In that regard, China’s open-model strategy and manufacturing dominance will reinforce each other. Cheap, adaptable models accelerate deployment across the real economy while those deployments generate real-world data and use cases that can feed back into further model improvement.

The United States should not dismiss the importance of its lead in the AI race. That lead worries Beijing, not least because a more automated Chinese economy would also become more vulnerable to AI-generated cyber threats. But nor should Washington assume that China cannot catch up with American capabilities over time.

This AI competition represents part of a broader struggle over tech supply chains and geopolitical influence. Decisions over whether to adopt US or Chinese models could produce a more fragmented global reality, with different regions relying on different cloud providers, chips and security structures. The result will likely be a global economy which is divided into competing spheres, rather than one which produces a single winner.

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Miquel Vila is a political and geopolitical risk consultant focusing on industrial strategy, critical infrastructure and global supply chains.

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