The latest Investing Matters Podcast episode with multi-award-winning fund manager and international bestselling author Lee Freeman-Shor has just been released. Listen here.
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What strong gold says about the weak $US
Too confident in the indomitable dollar, the US saw sanctions as a cost-free way to fight Russia without risking troops. But it is paying the price in lost currency allegiances, with gold left as the main safe haven.
Today commentators overwhelmingly agree that a weakening US dollar cannot possibly lose its status as the world’s dominant currency because there is “no alternative” on the visible horizon. Perhaps, but don’t tell that to the many countries racing to find an alternative, and such complacency will only accelerate their search.
The prime example right now is gold, up 20 per cent in six months. Surging demand is not led by the usual suspects – investors large and small, seeking a hedge against inflation and low real interest rates.
The heavy gold buyers are central banks...
Instead, the heavy buyers are central banks, which are sharply reducing their dollar holdings and seeking a safe alternative. Central banks are buying more tons of gold now than at any time since data begins in 1950 and currently account for a record 33 per cent of monthly global demand for gold.
This buying boom has helped push the price of gold to near-record levels and more than 50 per cent higher than what models based on real interest rates would suggest. Clearly, something new is driving gold prices.
Look closer at the central bank buyers, and nine of the top 10 are in the developing world, including Russia, India and China. Not coincidentally, these three countries are in talks with Brazil and South Africa about creating a new currency to challenge the dollar.
Their immediate goal: to trade with one another directly, in their own coin. “Every night I ask myself why all countries have to base their trade on the dollar,” Brazilian President Luiz Inácio Lula da Silva said recently on a visit to China, arguing that an alternative would help “balance world geopolitics”.
Thus, the oldest and most traditional of assets, gold, is now a vehicle of central bank revolt against the dollar. Often in the past both the dollar and gold have been seen as havens, but now gold is seen as much safer. During the short banking crisis in March, gold kept rising while the dollar drifted down. The difference in the movement of the two has never been so large.
And why are emerging nations rebelling now, when global trade has been based on the dollar since the end of World War II? Because the US and its allies have increasingly turned to financial sanctions as a weapon.
Astonishingly, 30 per cent of all countries now face sanctions from the US, the EU, Japan and the UK – up from 10 per cent in the early 90s. Until recently, most of the targets were small.
Go gold, its about time the US$ was recognised for what it is ...a tool of US policy and hegemony
the gnome
It’s a no brainer at the mo, especially after the last set of results.
At some point the “drop” of inflation will accelerate and gold will shine as will this- gold has stayed well considering the hawks in the FED…
Have to say agree and happy that central banks drop $ and buy gold, wise divesting at times when Fed rate is halting and especially because the combination of high inflation and high rates is choking the US economy.
But not just the US, dangers of defaults on debit are surfing all over the western world, for example I learned that Volkswagen is about to take on some $300 billions in debit, in trying to catch up with the EV wagon and not considering the internal combustion car assets they will have to write of...
But for U$D to lose its global currency status, have the feeling that gold wont be part of the equation, but a simple side effect of USA foreign policies including indeed sanctions.
The BRICS countries to create their own commune currency and challenge directly the U$D, they would have to value this currency, against a financial and economic equation among these countries, which take in consideration their current exchange rate against possibly the U$D itself. If they peg it against gold they would not have and metrics of comparison with the rest of the world with witch they also trade. Also pegging against gold would run the risk of creating a currency becoming too expensive for exports...
So far they have been doing only bi-lateral trade agreements which on its own doesn't challenge the U$D but rather is creating many discrepancy in commodities pricing....This also is a side effect which I am not so sure how will evolve within BRICS and around the wider world economies...Interesting times
Luck ,pegging their BRICS currency to Gold would not make their exports more expensive, but others with not much Gold reserves in comparison to their money in ciculation , ie debt.
Those countries Fiat paper currencies would lose their value, that is inflation.
So it is clear their imports would be more expensive.
But if they need those commodities the only option is to pay.
https://www.investing.com/analysis/gold-price-invalidation-confirmed-whats-next-200637508
Though you may be interested.
As always, there are as many bearish as bullish and vice versa- lol. Like I’ve always said, things can only go up to down , so people can write a millions words and provide a million charts or just a sentence or one chart- each has 50/50 chance of being right that’s about it lol. I prefer to thing of future events deciding what happens rather than past ones dictating the future… the world is littered with bad predictions based on past performance
Here's another one from investing.com- I hope this comes true lol
https://uk.investing.com/news/cryptocurrency-news/bitcoin-could-hit-100000-by-end2024-standard-chartered-says-2994145?utm_source=responsys&utm_medium=email&utm_campaign=Daily_Digest&utm_term=Editorial_DailyDigest_V3_UK_962168&utm_content=cta_button
Steve on bitcoin
Here's another one from investing.com- I hope this comes true lol.
I wont invest too much money on it, if any at all....
I’ve been posting my views on this board on crypto for years- people know my position and views :-)