If you want a sense of gold’s future direction, you can spend days wandering around the Internet looking for relevant data and trustworthy opinions. Or you can just pull up a copy of In Gold We Trust (IGWT), an immense report published annually by European wealth management firm Incrementum AG. Typically running to more than 300 pages, IGWT combines dozens of gold-related charts with a clear overview of the concepts the charts illustrate. The result is a must-read for precious metals investors.
Here’s an excerpt from the 2022 edition:
The Momentous Freeze of Russian Foreign Exchange Reserves
The status of the US dollar as the global reserve and trade currency is showing unmistakably widening cracks. For many years now, we have been documenting the process of de-dollarization. We are now eyewitnesses to a momentous breach of confidence that is preparing the ground for a move away from the US dollar as the world’s reserve currency and, in the medium term, accelerating the path to a new global monetary order.
The decision of the G7 and the EU on February 26 to freeze the US dollar and euro currency reserves of the Russian Central Bank, which account for about 60% of its total international reserves, will go down in monetary history. Although there have been sanctions against pariah states such as Venezuela, Iran, or the Taliban’s Afghanistan before, they have never before been applied against a state with veto power in the UN Security Council, a former member of the leading economic nations (G8), a nuclear power, and one of the world’s most important exporters of raw materials.
With the weaponization of money, however, the US and the EU are unlikely to have done themselves any favors in the medium to long term. The decision clearly demonstrates to many US-critical nations how quickly US dollar reserves can transform from a highly liquid asset to useless pieces of printed paper. De facto, the US and the euro area have told the world that they no longer want to pay their economic quid pro quo from previous trade deals.
The volume we are talking about is enormous: The global foreign exchange reserves of central banks amount to around 12trn USD, of which the US dollar accounts for about 60% and the euro for 20%. China, in particular, will have been watching Russia’s reserve freeze with a wary eye and will be stepping up its efforts toward monetary sovereignty. In addition, the freezing of currency reserves has a potentially strong deflationary effect…
We are concerned that the West may be overestimating its position with regard to its de facto monopoly on international currency reserves. The economic importance of the East – especially Asia – has increased massively over the past 20 years. This power has been highlighted by Sergey Glazyev. He is considered one of Russia’s most influential economists and is a member of the National Finance Council and former Minister of Foreign Economic Relations. He was also an economic advisor to President Putin from 2012-2019. Glazyev explained the role that commodities will play in the emerging multipolar monetary order:
“The third and the final stage on the new economic order transition will involve a creation of a new digital payment currency… A currency like this can be issued by a pool of currency reserves of BRICS countries… the basket could contain an index of prices of main exchange-traded commodities: gold and other precious metals, key industrial metals, hydrocarbons, grains, sugar, as well as water and other natural resources…”
We think it is plausible that gold, as a neutral monetary reserve, will emerge as one of the beneficiaries of the troubling conflict between East and West. In an increasingly polarized world that is dividing into two blocs, gold can act as a neutral, nonstate monetary intermediary. Meanwhile, the trend of gold enjoying increasing popularity among central banks has continued unabated since 2008. Thus, while the BRICS countries have significantly increased their gold reserves in recent years, the West, especially the euro area and the US, is still well ahead in this ranking.
And here are a few more charts:
The public face of Incrementum is portfolio manager/analyst Ronald-Peter (Ronnie) Stöferle, whose global perspective and clear speaking style make him one of the most accessible sources in the sound money space.
A couple of his recent YouTube videos:
Investor Clues from Modern History
From Brazil to Argentina to Cyprus, modern history is full of dangerous lessons about how desperate governments can get when things start getting rough. And if you think such a dangerous government misstep could never happen in the U.S. … it already has.
The American economy is cracking, and Fed Chair Jerome Powell can’t do a darn thing to stop it. That leaves investors asking what they can do to protect themselves. The answer is laid out in this free emergency broadcast from Martin Weiss, PhD.