2024-04-08 18:08:00
• Global central banks’ hunger for gold continues
• Peter Schiff fears a return to the gold standard
• Changes in the global financial system
Global gold demand climbed to a new record level of 4,899 tonnes in 2023, according to a gold market report from the World Gold Council (WGC). One of the factors contributing to this was strong demand from central banks. Central banks around the world have together acquired a net 1,037 tons of gold, which is just 45 tons less than the record set in 2022.
Preparations for Gold Standard
China and Russia in particular stood out as gold buyers. Peter Schiff sees this as a clear indication of a strategic move away from the US dollar. “Central banks are buying gold because they know that the hour has struck. The days of the US dollar as a reserve currency are numbered,” explained the renowned investment strategist and economist in an interview, according to “Benzinga”.
The US currency has been used extensively as a transaction and reserve currency in international payment transactions for decades. Gold and crude oil, among others, are predominantly traded in US dollars. This clearly shows the importance of the greenback for the global economy. But according to Schiff, the recently observed aggressive gold purchases by central banks indicate preparation for a system in which gold once more plays a central role in the global financial world.
Protection once morest sanctions risks
Around a year ago, the International Monetary Fund (IMF) took a closer look at the gold purchasing trends of 144 countries and found that central banks had increased their gold reserves since the global financial crisis in 2008. This crisis has increased the need to protect oneself once morest economic and geopolitical risks. And gold is ultimately considered a safe haven in times of crisis.
According to the IMF, another reason for the central banks’ hunger for gold is concern regarding sanctions risks. According to the study, the financial sanctions jointly imposed by the USA, Great Britain, the EU and Japan once morest Russia because of the attack on Ukraine may also have contributed to the emerging countries holding a larger part of their reserves in a form that is better protected from sanctions is.
Huge impact
If Schiff is right, the resulting decline in global demand for the U.S. dollar might lead to higher interest rates and reduced financial flexibility for the U.S. government. “If the world returns to the gold standard, the US economy will have to settle its massive debt and unfunded liabilities, which might be a painful adjustment,” the economist warned.
But the consequences, of course, were not limited to the US: efforts by various countries to reduce their dependence on the US dollar might lead to a more multipolar financial landscape, with multiple currencies and assets competing for dominance. Thus, the trend towards the gold standard – i.e. towards a stronger link between the money supply and gold stocks – signals a broader shift in the global economic order.
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