When you start talking to folks about gold, it, for whatever reason, conjures up one of two images: Pirates. Crazy doomsday preppers. I don’t know why that is, considering that people have been snapping up gold like Hungry, Hungry Hippos eating those little marble things for nigh unto the beginning of time, but alas, popular culture’s portrayal of those who are big into these kind of investments has not been kind. And why would they be? Leftists run all of Hollywood, right?
Well, according to Gainsville Coins, gold investing started to become a legitimate thing for central banks to buy back in 2009, and a rising in gold prices has made the precious metal’s share of global international reserves expand to the point that it has surpassed most fiat currencies, including the euro, which happened at the end of 2023 and now has its sights on taking out the U.S. dollar.
Often when financial analysts draw charts on the distribution of international reserves they focus on foreign exchange (omit gold) and start when the euro was introduced in 1999. Based on such charts the dollar’s share of total reserves appears to be falling slowly, from a peak of 72% in 2001 to 58% in 2023. In addition, it seems there is not one specific currency that is competing with the dollar.
But why not include gold and look back as far as possible? By combining multiple sources, we get a glimpse of the dissemination of reserve currencies from 1899 until 1935 (both fiat and gold), and a full picture starting from 1950.
This paints a whole different story. Instead of showing only the demise of the dollar at snail pace, the historic balance between gold and fiat currencies is revealed. It’s not the dollar that normally backs the international monetary system, it’s gold. Gold used to make up the majority of international reserves, even when sterling was said to be the world reserve currency before the dollar. In a chart covering more years but only gold and the dollar, the latter’s reign becomes even more relative.
The U.S. dollars overall share of total reserves plunged 48 percent in 2023, which led to a significant decrease in trust for “credit assets,” otherwise known as fiat currencies, as folks began to worry about wars, asset bubbles, and fear over inflation, all while gold is continuing to rise.
The report then goes on to point out that personal calculations of official gold reserves, which includes covert acquisitions, the percentage of total reserves of gold hit 18 percent last year, which is a big increase from the 11 percent it was in 2008. Gold has blown past the euro, which is seemingly glued to 16 percent. And it doesn’t look like all the issues with fiat currencies are going to go away any time soon, which means there’s a possibility gold will surpass the dollar too.
I know what you’re thinking. The last thing you wanted to hear about was bad economic news. Unfortunately, you’re going to hear a lot more of it before we see any improvement. And to be frank — but you can still call me Michael — things aren’t even going to get better if Joe Biden gets a second term. Just throwing that out there.
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