The dollar is still a primary currency for spending, liquidity and foreign exchange. But it’s no longer the top savings asset. Gold (now a Tier-1 asset…) will continue to be a high-value reserve (ie, it holds its wealth) better than any amount of money.
In any case, the dollar and US Treasuries are now quantitatively less dear, less reliable, less strong and well much less than they were at Bretton Woods circa 1944.
In 2022
When policymakers weaponized what should have been a neutral global reserve currency against a major nuclear power (by stealing $400 billion worth of Russian assets) the BRICS coalition was already in the making. In short, many nations of the world, including the oil nations, have realized that they need a reserve asset that cannot be frozen/stolen at will and that at the same time retains (rather than loses) its value.
But instead of ending the dollar as the world’s reserve currency, most of that world is just spinning (around or out of it).
The Hard data
Hard data is available:
- dozens of BRICS+ countries trade off the dollar,
- trade in local currencies for local goods and then offset surpluses with physical gold;
- gold price is much better/fairer in price in Shanghai than in London or New York.
This means that decades of rigging the pricing of precious metals on legalized fraud platforms like COMEX are coming to an end post-Basel III and post-sanctions.
This matters because, like it or not, the rising power of the BRICS+, tired of being wagged by the tail of an ever-inflation-extracting dollar, is growing in economic power – away from a debt-driven West.
If the world is moving into a commodity supercycle where real assets begin to show a slow rise against falling stock markets and an increasingly undervalued dollar. This should do the discerning investors.
The change with the petrodollar
When it comes to commodities, currencies and therefore gold, everything is changing around us – at least for those with eyes to see and ears to hear. To this end, we cannot ignore what is happening in global energy markets:
Oil, like any other item of international supply and demand (i.e. trade), can be settled equally in gold and not in petrodollars pegged to the dollar. In 2023, by the way, 20% of global oil sales were made outside the dollar, a fact otherwise unthinkable until the White House imposed sanctions on Russia.
The implications of this simple observation (as well as its impact on) the dollar, commodity pricing and gold are extraordinary.
If the world is moving into a commodity supercycle where real assets begin to show a slow rise against falling stock markets and an increasingly undervalued dollar. This should do the discerning investors.
The change with the petrodollar
When it comes to commodities, currencies and therefore gold, everything is changing around us – at least for those with eyes to see and ears to hear. To this end, we cannot ignore what is happening in global energy markets:
Oil, like any other item of international supply and demand (i.e. trade), can be settled equally in gold and not in petrodollars pegged to the dollar. In 2023, by the way, 20% of global oil sales were made outside the dollar, a fact otherwise unthinkable until the White House imposed sanctions on Russia.
The implications of this simple observation (as well as its impact on) the dollar, commodity pricing and gold are extraordinary.
The recent past
Before the US weaponized the dollar against Russia, the world “towed” the line on both the dollar and trading oil in dollars, which was very, very, very convenient for the US and its Modus Operandi of exporting US inflation to all the others. For example, in the past when commodity prices were very high, nations like Saudi Arabia would gobble up US Treasuries and essentially push the dollar up a lot.
This, of course, was good for stabilizing and absorbing an otherwise overproduced and vulnerable dollar. At the same time it helped US Treasuries remain dear and thereby compress yields.
In some ways, this was even good for global growth, as the dollar was kept stable and low enough to grow countries like China and other emerging markets. These other nations, in turn, continued to buy the “risk-free” dollars and thus helped to reverse (“rehabilitate”) the US debt-based growth narrative.
After all, if everyone else is buying US bonds, Uncle Sam will be able to finance the American dream with debt all the time, right?
This situation is ending, with Saudi Arabia moving ever closer to the BRICS, which are looking for a way to bypass the dollar and US bonds in their trade – including oil.
This means that the regime that has worked in favor of the dollar and the government bond market since the early 70s (ie global demand for the USD through oil) is slowly (but surely) steadily ending before Biden’s barely open eyes.
Somehow all commodities from copper to yes even oil will be bought outside of the dollar and settled in gold, which probably explains why central banks are hoarding pure gold (top line) and pure dumping in dollar since 2014.
