The price of gold is again testing its all-time highs. It has appreciated 10% since the start of the year, compared to 80% for bitcoin.
$2000 per ounce of gold
Geopolitical tensions, energy scarcity and inflation are all good reasons to turn to safe havens. Gold is still doing well.
Partly thanks to the central banks which bought more than 1136 tons of gold in 2022. A record dating from 1967. Nearly 1/5 of all the gold out of the ground belongs to them.
Since 2010, the Russian, Chinese, Indian and Turkish central banks have bought the most. Ten central banks account for 84% of all gold purchased between the end of 1999 and the end of 2021. Those of China, Russia, Turkey, India, Kazakhstan, Uzbekistan, Saudi Arabia, Thailand, Poland and Mexico.
In 2022, countries like Egypt, Qatar, Iraq, United Arab Emirates have appeared in the top 10.
Overall, Russia and China are by far the largest buyers of gold. A trend that has accelerated on the Russian side since 2014. That is to say since the annexation of Crimea in reaction to the coup in Ukraine organized by the United States.
The gold rush of the Sino-Russian tango dates back to 2008, when the Fed took out its printing press to finance a debt that had become Ponzian.
Moreover, the freezing of 300 billion dollars and euros belonging to Russia has not gone unnoticed. Not a week goes by without a country announcing that it is distancing itself from the dollar.
So much so that some are pleading to resuscitate the Gold Standard.
Return of the Gold Standard?
Republican MPs Alex Mooney, Andy Biggs and Paul Gosar (R-AZ) have present a bill entitled Gold Standard Restoration Act (restoration of the gold standard).
If this law is passed, the US Treasury and the Fed will have 24 months to publicly disclose US gold stocks. After which the dollar will again become convertible into gold on demand.
“The gold standard would protect against Washington’s irresponsible spending habits”said MP Mooney.
We would return to the Bretton Woods system which President Nixon put an end to in 1971. This decision provoked the ire of Europeans to whom Treasury Secretary John Connally replied: “The dollar is our currency, but your problem”.
The consequence of a return to the Gold Standard would be painful for the United States. The country has a chronic trade deficit.
Washington would lose its 8,130 tons of gold (~500 billion $) in less than a year. Indeed, the US current account deficit is currently running at $200 billion per quarter.
Once gold stocks are depleted, the shortfall will result in a lower dollar exchange rate. And this, until the current account of the United States returns to equilibrium. This will go through a reduction in imports and therefore a monster inflation for what is imported.
Americans needed to go on a diet anyway. It will do them good. But before that, it is not impossible that the United States will default on its debt of 6.7 trillion dollars to the rest of the world…
Incidentally, it is highly likely that the CBDC is precisely intended to balance trade balances. A programmable currency would be perfect for reducing consumption (of imported products)…
Enter Bitcoin
Gold is a store of value that has stood the test of time. It is true that we have failed to turn lead into gold.
[À vrai dire, les accélérateurs de particules permettent d’arracher des neutrons et des protons à des atomes de plomb ou de mercure pour en faire de l’or. Mais le coût énergétique est rédhibitoire.]
China, which has a chronic current account surplus, could announce the convertibility of the yuan into gold. But beware of the Chinese Nixon when China turns into an importing country…
This is how gold has this big disadvantage of weighing heavily. Shipping gold by plane is very expensive. Not to mention the huge expense to check the purity of the metal.
It is no coincidence that countries paid each other in dollars (as good as gold) and not directly in gold. Unfortunately, all it takes is a simple speech to confiscate all the gold in the world. The Gold Standard is doomed because of its physical limitations.
Bitcoin does not have this problem. It travels at the speed of light for next to nothing and could very easily oil the $25 trillion in annual international trade. Bitcoin already transfers the equivalent of several trillions of dollars per year.
Finally, it should be noted that gold mines are ecological disasters that are unevenly dispersed throughout the world. Conversely, any country can generate electricity. From this point of view, bitcoin once again outperforms gold.
Would the Russians have realized this, those who stopped accumulating gold in March 2020? And who are investing heavily to mine bitcoin in Siberia?
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