De-Dollarization: US Pays China in Gold as Treasury Hits Record Buyback

The dollar is picking up strength again. Traders are leaning bullish, oil prices are pushing inflation back into the conversation, and the US Treasury is stepping in with its biggest debt buyback on record. But at the same time, there are signs that the US-China gold trade is becoming more active in the background, but that doesn’t match the overall narrative.

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Dollar Hits 3-Year High as US Settles China Trade Deficit in Physical Gold

In three of the last four months, the US has reportedly settled part of its trade deficit with China in gold. This was not done in dollars or in Treasurys but in physical metal. This, however, is not a formal policy shift and hasn’t been announced as one. Yet, it seems to be happening often.

Meanwhile, options data shows traders are paying the biggest premium for dollar upside in over three years. One-month risk reversals on the Bloomberg Dollar Spot Index have surged to +92 basis points. This is a sharp swing from -90 in January. This hard shift was largely driven by rising oil prices and inflation concerns linked to geopolitical tensions.

At the same time, the dollar index 2026 is hovering near a three-month high. This signals a brand new demand for the US dollar.

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Massive Debt Buyback Underway

Amidst this, the Treasury is moving just as aggressively, as a $15 billion debt buyback is on deck. This surpasses last week’s $14.7 billion and marks the largest on record. Buybacks are not unusual, but the size stands out.

Then comes the trade data. The US Commerce Department reported that the trade deficit narrowed to $54.5 billion in January, with exports rising 5.5%. Gold shipments were a big part of that swing, continuing a pattern of volatile flows tied to the metal. But gold has been surpassing the US dollar as the top reserve asset amid China’s massive accumulation.

The idea of a possible shift in how parts of the US-China gold settlement are being handled. It’s not official, and there has been no policy announcement, but it is showing up often to get attention. This is where the conversation around US de-dollarization and gold starts to feel a bit more real. The dollar is still dominant, and for now, markets are backing it. But when trade between the two largest economies is being settled in gold, it raises questions about how things might be changing.

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