Disclaimer: The content from The Daily Reckoning Australia’s global cast of characters is their own view and opinion. It is not to be taken as investment advice.
Those Who Have the Gold Make the Rules
- The plan to ditch King Dollar
- No one wants greenbacks
- Putin Speaks. You Can’t Say You Weren’t Warned
‘History never looks like history when you are living through it.’
John W Gardner
I’ll confess, I know very little about John W Gardner.
I know he worked for President Lyndon Johnson in the sixties but that’s about it.
However, I stumbled upon that quote last year, and it stuck with me.
Because it’s true.
And something historic is happening today.
There’s a shift in the monetary system.
The world is slowly inching away from the US dollar.
Of course, it doesn’t happen overnight. Dominant currency changes generally take decades to play out.
However, the days of the US dollar are numbered.
There is a deep mistrust of the power of ‘King Dollar’. The US has weaponised their currency on any country they’ve seen fit for decades.
All an attempt to coerce the government — or the elites — in a particular country into what they want.
So it came as no surprise, to discover that more gold was bought by central banks in 2018 than any other year since 1971.
Let me put that another way.
More than 651 tonnes of gold went to central banks in just 12 months. That’s almost double the 374 tonnes bought by central banks in 2017.
1971 by the way, was the year President Richard Nixon took the US dollar off the gold standard.
He did it without consulting any outside government, effectively putting the entire global monetary system on a fiat currency.
It’s no wonder there is a bad taste left in other governments mouths. They didn’t get to be part of a decision that ultimately affected everyone.
So who is buying up all this gold?
Well, we can assume China, however they don’t update their official gold holdings.
Russia on the other hand, has no problem announcing their gold stores. Confirming they are the proud owners of a total 2,066 — roughly one quarter of what US holds. In addition, most of the gold bought came from gold mines in Russia.
Turkey and Kazakhstan were big buyers too. European central banks like Hungary and Poland, adding some 31 and 25 tonnes respectively.
But even smaller economies joined in the gold buying spree. India, Mongolia and even the Central bank of Iraq topped up their gold stores.
Why the sudden increase?
Or, I should say, an attempt to ‘de-risk’ themselves from exposure to the US dollar. Holding more US dollars than gold leaves these countries vulnerable to decisions made in the US.
If we exclude the European countries for a moment, the rest have all suffered one way or another from economic sanctions by the US.
Countries like India, China and Russia have all felt the wrath of the US when their governments don’t toe the line.
The US made the mistake of weaponising the US dollar for their benefit, to gain a political edge.
Eventually people get fed up with being pushed around. The increasing gold stores is a good indication the historic shift away from the US dollar is underway.