Listen Carefully! They Just Declared War on Your Gold & Silver Investments - Alasdair Macleod
Listen Carefully! They Just Declared War on Your Gold & Silver Investments - Alasdair Macleod
Spot gold witnessed a sharp rally on Friday despite hotter-than-expected US inflation data. As traders turned their attention to potential rate cuts amidst signs of a weakening US economy in recent macroeconomic indicators, spot gold witnessed a sharp rally. The demand in China, which has significantly contributed to the recent gold price rally, is now under scrutiny as market watchers assess whether high gold prices will prompt central banks to slow down their purchases. In contrast, outflows from physically backed gold exchange-traded funds persist.
Alasdair Macleod, Head of Research for Gold Money, illuminates the perceived rise in gold prices, suggesting that it reflects a decline in credit values rather than increased gold purchases by entities like the Bank of China. Macleod says these entities are selling dollars, signaling a shift from credit-based assets to tangible assets like gold.
In a notable move, BRICS member China executed a record sell-off of US treasuries and agency debt bonds worth a staggering 53.3 billion dollars during the first quarter of 2024. This historic sell-off coincided with the US dollar hitting a one-month low at 104.20. Macleod contends that central banks' actions, such as the People’s Bank of China selling dollars and potentially acquiring gold, are reactions to shifts in confidence in credit-based systems.
The massive debt burden of 34.4 trillion dollars raises concerns, prompting BRICS countries to rely more on local currencies than the dollar. Even Belgium, traditionally considered a close ally of the US, divested 22 billion dollars worth of treasuries during the same period. Macleod underscores that the loss of faith in the dollar could trigger a collapse in the value of other fiat currencies, making gold an attractive alternative due to its intrinsic value. Analysts have attributed the gains in precious metals in 2024 to expectations of interest-rate cuts by the Federal Reserve later this year.
Throughout history, currency crises have inflicted severe economic hardships, with significant examples including the Weimar Republic in Germany after World War I, the Mexican peso crisis of 1994, and the Asian Crisis of 1997. These crises, alongside others like the 1998 financial crisis in Russia, the Argentine crisis in the late 1990s, and more recent events such as the economic crisis in Venezuela in 2016 and Turkey's crisis in the same year, have led to widespread impoverishment and economic disparities.
According to Alasdair Macleod, these collapses have created opportunities for certain groups, such as speculators and foreign investors, while severely impacting the livelihoods of many. In times of such turmoil, gold emerges as a potent protector against currency devaluation, helping to safeguard wealth over time. Its real value and scarcity shield against the erosion of purchasing power experienced with fiat currencies.
As regular currencies lose value during crises, gold becomes more expensive, making it a reliable investment option. Macleod emphasizes the importance of hard currencies like gold during economic instability. He notes the absence of hard currencies in the contemporary financial system. He suggests that Asian countries, particularly China, may consider reverting to a gold standard if the dollar's value significantly declines.
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