De-Dollarization: The Global Monetary Mega-Trend

27 Nov

De-Dollarization: The Global Monetary Mega-Trend

Nations around the world continue to demonstrate that they want more gold reserves and fewer dollars.

We have reported on this global megatrend regularly (see More Gold, Please!, The Fed Cuts Rates While the World Buys Gold, and De-Dollarization.

This shift away from dollars and into gold is a harbinger of things to come for two reasons.  

First, if one central bank decides to upgrade its reserves with the world’s most enduring money, it may only represent a political statement.  It is perfectly understandable if a heavily sanctioned state like Iran or Venezuela decides to avoid dollars for political reasons.  (Note, though, that US sanctions have proliferated to so many countries that the US is forcing the world’s turn to dollar alternatives.)

But those jumping on the gold-bandwagon include friendly countries like Hungary and Poland.  Most recently Poland has been ratcheting up its gold reserves, purchasing 125 metric tons over the past two years.  At the same time Poland is repatriating gold.  This week Poland announced that it has brought home to Warsaw 1oo tons of gold that had been held on its behalf by the Bank of England.  This is not a sign of long-term confidence in the post-war dollar reserve monetary order.

The global megatrend is also important because it represents a huge and stable base of gold holdings.

Central banks need to hold reserves against which they issue their own currencies.  Central banks can be described as strong hands; having made the decision to make gold a foundation of their monetary systems, and adding gold reserves at rates measured in hundred of tons, they can be expected to maintain that position.

To sum up, confidence in the global dollar-based monetary system is beginning to crack.  This loss of confidence is justified by trillion-dollar deficits, ballooning debts, both corporate and governmental, politics driven by giveaways, vote-buying, and spending sprees, and finally by a new surge in reckless Fed money printing.

At the same time, gold is moving into strong hands, holders not prone to liquidate their holdings.  There has been a years-long subterranean flow of gold from the West (the US and Europe) to the East (mostly China), also strong hands.

We would like to see our friends and client protect themselves and profit from advance knowledge of these trends.  Simply call or visit an RME professional to implement a sound strategy for the times ahead.