Are we on the verge of a return to the Gold Standard? That's what Saudi Arabia's secret purchases suggest. When will bitcoin be available?…
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Gold is on the rise. It is at an all-time high, around $2,600 an ounce. Who is buying? Central banks. Some are not hiding it, but others prefer to keep a low profile.
It’s an open secret that China holds much more gold than its official reserves suggest. What we didn’t know, however, was that Saudi Arabia is playing the same game. That’s according to analyst Jan Nieuwenhuijs in moneymetals.com :
“It appears that the Saudi central bank has secretly purchased 160 tons of gold in Switzerland since the beginning of 2022, contributing to the current rise in gold. Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, this time they could become the linchpin in its dissolution.”
Jan Nieuwenhuijs notes that many countries have been buying gold at any price since the West froze Russian foreign exchange reserves in February 2022. This is the case of the Saudi kingdom, even if the official reserves do not move.
Officially, gold purchased by central banks is not included in cross-border trade statistics. These only refer to gold purchased by industry and individuals. However, some of this gold often ends up in central bank vaults. This is most likely the case in China, according to Nieuwenhuijs, but also in Saudi Arabia:
“Comparing the World Gold Council’s (WGC) estimates of central bank purchases to what central banks report buying from the IMF, we can conclude that “unreported” purchases have skyrocketed since 2022. People familiar with the situation tell me that this is largely due to the Chinese central bank and, to a lesser extent, the Saudi central bank.”he says.
Gold vs Dollar
The above chart is very telling. Saudi Arabia's total gold imports began to exceed (very stable) retail demand just after the Russian reserves were frozen.
This is in line with the fact that the kingdom has recently reduced its dollar reserves. They went from 180 billion to 110 billion between January 2020 and June 2023. They have since risen to 140 billion.
It should also be remembered that Saudi Arabia has threatened to dump French debt if Russian foreign exchange reserves are seized for good. In such a context of geopolitical tensions, it makes sense to turn to gold.
This is what Russia and China have been doing for many years. Russia has been massively accumulating gold since 2008. That is, since the Fed took out its printing press to monetize the debt (Quantitative Easing). Russian gold reserves now stand at 2,350 tons, up 400%.
China started accumulating gold even earlier, just after the invasion of Iraq in 2003. Its reserves now stand at 2,250 tonnes (“officially”). In contrast, its dollar reserves (in US Treasury bonds) have increased from $1,200 billion to $780 billion between 2018 and today.
India also makes no secret of its gold gluttony. The BRICS in general seem to be preparing for a return to the Gold Standard. This would mean that no nation could afford to chronically import more than it exports.
This is the exorbitant privilege that the United States enjoys in imposing the dollar on international trade by the sword. This has been the case since 1975, when Washington managed to get the OPEC nations to sell their naphtha exclusively in dollars.
Bitcoin vs Gold
Saudi Arabia probably hoped that its gold purchases would remain secret so as not to upset Uncle Sam. But you can't ship hundreds of tons of gold without it eventually getting out.
It would be much more discreet to buy bitcoins. It would even be safer. We all know what happened to the Iraqi gold:
Iraq was not invaded because of non-existent “weapons of mass destruction.” The United States took Baghdad in response to Saddam Hussein's decision to undermine the petrodollar by selling Iraqi oil exclusively in euros rather than dollars.
All US wars are primarily motivated by the need to protect the petrodollar. It is no coincidence that the BRICS are making de-dollarization a priority. As Donald Trump recently stated:
“The dollar must remain the international reserve currency. Failure would be like losing a war. We will become a third world nation. We cannot afford that.”
Many believe that the war in Palestine is aimed at setting the Middle East ablaze. A war with Iran would put pressure on Riyadh by saying “You are either with us, or against us”. [vous êtes avec nous, ou contre nous].
All of this is to say that bitcoin offers a major advantage over gold in the event of war. The attacked nation can instantly transfer all of the country's reserves to a safe location.
Overall, gold’s comeback bodes very well for bitcoin, whose absolute limit of 21 million inherently makes it a much better store of value than gold. We dig up over 3,000 tons each year, while 94% of BTC has already been mined.
For more geopolitics, read our article: “Dollar – Trump threatens BRICS” .
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