Key Points
- Balaji Srinivasan, an ex-coinbase executive, has reacted to an Invesco research citing investors and Central Bankers flocking into gold.
- The research spans 85 sovereign wealth funds, and 57 central banks, all collectively managing $21T in assets.
Balaji Srinivasan has reflected on central banks buying gold as fiat money continues to weaken globally as economic factions grow, showing worrying times ahead that inflation may continue for a while longer. He claims that the cited central bankers are relocating funds from riskier investments as a strategy to brace against a de-dollarisation impact.
Balaji Srinivasan sheds light on central banks flocking to gold
In his summary, Balaji Srinivasan cites ten points on central bankers’ actions.
1) Flight to gold. “Amid volatile [bond] yields, 2022 saw a flight to gold, questions around the US dollar’s future as the world’s reserve currency, and increased diversification of currency holdings.”
2) Gold hedges inflation. “Reserve portfolio managers identified inflation as a key risk…69% of central banks countering global inflation through gold allocations.”
3) Gold as a safe-haven. “96% of central banks increasing gold allocations cited its status as a ‘safe-haven’ asset”
4) Sanctions are a major factor. “A substantial percentage of central banks are concerned about the precedent set by the US freezing of Russian reserves, with the majority (58%) agreeing that the event has made gold more attractive.”
5) Physical gold in vaults only. “Consequently, central banks now prefer to hold physical gold rather than gold ETFs or derivatives…”
6) Not even London is trusted. “We…had it held in London…but we’ve now transferred our gold reserves back to our own country to keep it safe – its role now is to be a safe-haven asset” said one central bank based in the West.
7) Yuan rising as a trade currency, not a ‘reserve’ currency. “A considerable proportion do expect a shift towards renminbi (27% of central banks), but expectations differ based on the region.”
8) India now the #1 emerging market to invest in, over China. “India has now overtaken China as the most attractive Emerging Market for investing in Emerging Market debt.”
9) Dollar is being hedged with EM currencies (!). “While the US dollar is expected to retain its dominance, central banks are increasingly exploring diversification into Emerging Market currencies to hedge against volatility.”
10) Everyone wants to de-dollarize. “People have been looking for alternatives to the dollar and euro for a long time and they would’ve gone to them already if there were any suitable alternatives.”
This report comes when the tension between economic powers is increasing. The United States has been under fire for their continued misuse of money and overprinting. As a result, nations are rising against the dollar, believing it is no longer the strong world reserve currency.
In June, the US hit its debt ceiling, resulting in emergency house proceedings to suspend it. That means the underlying problem was not addressed. A month later, the US spending has risen by a trillion dollars pushing the total debt to over $32.67T.
This debt trend has been discouraging to international economic powers. It has also worsened as the US has long been weaponizing the dollar against nations like China and Russia. As a result, these two nations and other 25+ interested ones have allied to develop the BRICS+ economic bloc.
BRICS+ will unveil a gold-backed currency that will replace the US dollar when the member states trade. The new report from Invesco shows that the reserve power that the US Dollar shortly held is being taken up by hard assets like gold and its alternatives (Bitcoin, now that even BlackRocks admits Bitcoin is a digital gold).
According to Balaji Srinivasan:
“The dollar is getting unbundled. When there’s an alternative in every situation, much of the dollar’s coercive power goes away. And that’s the theme of this report — sovereigns are seeking an exit from the dollar, and a hedge against its uncertain future”
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