In the news, there is a lot of talk of economic uncertainty. A lot of this economic anxiety stems from sanctions on Russia and the trade war with China. Although in the eyes of the United States establishment, those actions are fair-seeming and necessary, there are consequences to their actions.
And just to reiterate, Russian sanctions and the trade war that has been going on between the United States and China for some time. Now those countries, commonly viewed as adversarial or “revisionist” powers in relation to the United States are taking steps to safeguard their economy, and by extension, their power and future.
Analysts, notably Peter Schiff, who is a well-known financial commentator and economist have observed this trend from not only Russia and China (they just happen to be the two biggest countries carrying out this policy), but other nations’ central banks as well.
There is also a question what it means to the American consumer, especially with fears on what this means for the U.S. dollar in the long run.
The Gold Spree – Central Banks Go Shopping
Actions of central banks are very important to follower. They are some of the most powerful entities in the world. This is why I really pay close attention to them. When stockpile gold…something is up, or something will happen in the near-term.
As Peter Schiff has commented on Russia Today, it is not just Russia and China, but other nations’ central banks that are stockpiling gold. Russia, as of early September, is the world’s most committed buyer of gold.
The gold shopping spree by the two major world powers has created a bullish market for gold and brought the metal to 6-year high.
According to the World Gold Council:
1. There was a net increase of global gold holdings by 12% in the first half of 2019. This is a 12% net increase from the previous year.
2. Central Banks have purchased 374 tons of gold in the first half of 2019. That is the equivalent of $15.7 billion dollars worth of bullion.
And the gold buying is expected to INCREASE as economic uncertainly abounds and de-dollarization continues its geopolitical trend.
Why Is China and Russia Doing This? – Bracing For Impact
This gold-buying spree was spurred on by speculations of the U.S. Dollar’s decline. They are preparing for a future in which the dollar is no longer the leading currency.
Along with this are the heavy sanctions against Russia, and the ongoing trade war between China and the United States.
Taking those account, they wish to shield themselves from the fallout that will occur should the dollar decline and lose its global reserve currency status.
In my own opinion, I believe the sovereign gold-buying spree will help shield their countries from the effects of a weakened United States dollar.
The Central Banks of China, Russia, and smaller countries likeTurkey (especially now with Turkey and the United States on less friendlier terms) are making their decisions to not only safeguard their economies, but lessen their dependence on the U.S. dollar, which has, since the middle of the 20th century, been the global reserve currency.
Gold not only offers financial stability against inherently unstable fiat money, but having a solid reserve will afford them the ability to act more independently, especially if it’s to form their own interdependent global orders, as we are seeing with the Belt-and-Road Initiative or the Shanghai Cooperation Organization.
What Does This Mean To American Consumers – From Pax-Americana to Post-Americana
As an American consumer, this will inevitably affect you…
In the series of articles, we see that there is a trend of de-dollarization. That means the value of U.S. dollar will decrease. This will have a negative effect on our cost of living. Our money will be worth less.
It is a dreadful though, yes, and it should scare you. The dollar is only as good as number of people using it. It is only as good as the health of the United States economy will allow it to be. And as have learned from the past, and speculate what the future of the United States hold, that is not always a guarantee.
The other powers see the writing on the wall and they are acting accordingly. Geopolitical reasons aside, and let’s admit, China and Russia aren’t exactly on good terms with the United States in this time, they are attempting to safeguard their economies from the further de-dollarization and the fall out that is likely to occur as a consequence of the Sino-American trade war.
In short, this will be one of the factions that mark the decline of the American life as we know, or knew it…depending on how you see it…
What To Expect
In the near future, expect to see the price of gold rise in the future as the nations’ central banks buy more gold. The gold shopping spree as many are calling it, is expected to continue and increase.
Even though individual human beings are not exactly the same as countries, this will affect you. This will mean the price of gold will increase in the long run. Today, following 11/4/2019, the price of gold declined respective of the U.S. dollar, however this just a short term decline, on the daily scale. In the past few months, the value of gold has really shot up and has been in an upward trend since September 2018.
When looking at the charts on World Gold Council, it is important to keep in mind short and long-term trends.
Keep In Mind…
The thing to keep in mind is that it is not only adversarial powers that are stockpiling gold. It is many other countries as well. Russia and China are just the two countries that have the most fervent in building up their gold reserves in recent times.
We may very well enter a time when the United States dollar becomes an afterthought. Major Eastern powers stockpiling their gold reserves in anticipation of a “post-dollar” world is just one of the writings on the wall.
It is a trend that is continuing.
For now, the United States dollar is the world reserve currency, but its position as such is not certain.
Gold Demand Trends Q3 2019 – Central Banks – World Gold Council