![Gold remains a key reserve asset for central banks worldwide]
The Enduring Appeal of Gold as a Monetary Asset
In 2016, I published an article titled "Better to Buy Gold Than Exchange for Dollars", arguing that global quantitative easing policies would outpace gold production growth. While initially controversial, this perspective has proven prescient as gold demonstrates its resilience across economic cycles.
Modern Monetary Theory and Gold's Counterbalance
Post-WWII economic policies reveal a consistent pattern:
- Governments address imbalances through debt issuance
- Central banks purchase sovereign bonds (Fed: 60%+ assets, BOJ: higher ratios)
- Resulting monetary expansion creates currency devaluation pressures
Key Insight: Gold serves as a natural hedge against fiat currency depreciation, with the USD losing 90% value against gold since the Bretton Woods collapse.
Why Cryptocurrencies Can't Replace Gold
The Stability Paradox of Bitcoin
While some argue cryptocurrencies will displace gold, consider:
- Volatility: Bitcoin swung from $742 (2016) to $69,000 (2021), now stabilizing near $85,000
- Monetary Policy: No central bank could maintain price stability with such fluctuations
- Historical Context: Gold maintains 3,000+ years as monetary standard vs. Bitcoin's 20-year history
Notable Trend: Gold and cryptocurrencies have shown parallel growth, disproving substitution theories.
Structural Economic Risks Driving Gold Demand
The Low-Growth, High-Risk Era
Global economic conditions favor gold:
- Prolonged Peace Cycles: 80 years post-WWII created structural imbalances
- Reform Resistance: Short-term monetary fixes preferred over difficult reforms
- Emerging Market Slowdown: China's property downturn impacts global growth (-40% art prices since 2021)
Central Bank Activity:
- China increased reserves to 2,292.33 tons (+12.76 tons since 2024)
- Global gold purchases up 25% in 2024 despite Fed rate hikes
Gold Price Projections and Historical Patterns
Bull Market Phases Since 1971
| Period | Price Change | Duration |
|---|---|---|
| 1972-1979 | +1781.48% | 7 years |
| 1980-1999 | -69.51% | 20 years |
| 2000-2011 | +644.3% | 11 years |
| 2016-present | +212% | 9+ years |
Current Drivers:
- Geopolitical tensions (new US tariffs)
- Dollar credibility concerns
- Multi-polar world monetary transition
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FAQs: Understanding Gold's Investment Potential
Q: How does gold perform during economic crises?
A: Gold historically appreciates during periods of currency instability, serving as both hedge and safe haven.
Q: What's the ideal portfolio allocation to gold?
A: Experts recommend 5-15% depending on risk profile, with higher allocations during volatile periods.
Q: Why do central banks keep buying gold?
A: Diversification from dollar reserves and long-term store of value motivate institutional accumulation.
Q: Can cryptocurrencies reduce gold's relevance?
A: Their complementary performance suggests different roles - gold for stability, crypto for speculation.
Q: What indicators suggest continued gold strength?
A: Watch Fed policy shifts, real interest rates, and geopolitical risk indices for directional signals.
Conclusion: Golden Principles for Turbulent Times
As Trump-era policies and structural economic pressures mount, gold's strategic importance grows clearer. While not without volatility, its millennia-proven store of value function makes it essential for:
- Inflation hedging
- Portfolio diversification
- Long-term wealth preservation
The current bull market, while extended, may still have room given unresolved systemic risks. As the ancient adage reminds us: "All that glitters isn't gold" - but in this case, the real thing continues to shine.
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