Gold Is Becoming the Global Reserve Currency

Brien Lundin Brien Lundin

Brien Lundin

June 3rd, 2024 Comments

Of course, everyone knows that the U.S. dollar is the global reserve currency. Yet a new analysis reveals that gold is actually the money that every central bank wants to hold.

Let me first dispel some commonly accepted truths.

Look at the widely-held, almost unanimous, belief among analysts that gold remains in a correction.

Up until the metal opened for trading in New York today, I would have agreed with that sentiment. But, as you can see below, gold is gaining good ground so far today.

New York Spot Gold Bid (Chart)

It’s too early to call the correction over with, but a positive day is just what we’ve needed. Consider a longer-term chart:

60 Day Gold (Chart)

Looking at the decline in the last half of May, it’s easy to understand the dour outlook amongst gold bulls and bugs.

But also notice that we recovered well from the previous short-term correction and — especially if today’s gains hold — we’re setting both higher highs and higher lows.

Now let’s move on and gore another ox....

Gold Is Historically The Reserve Asset Of Choice

It is a universally held truth that the U.S. dollar is the global reserve currency, a status that conveys numerous advantages and privileges.

But a new report by Jan Nieuwenhuijs, who as you know I regard as today’s top analyst of global gold flows, shows that gold has historically been the most preferred reserve asset. (Hat tip to Jim Grant, who pointed me to this latest report out by Jan.)

Global International Reserves (Chart)

The chart above shows the historical preference for gold clearly. In fact, it wasn’t until the 1990s that the dollar overtook gold as a percentage of international reserves.

The chart also shows that the percentage holdings of the dollar are rapidly decreasing while those of gold are quickly increasing.

This is the result of America's weaponization of the dollar generally and specifically in the wake of Russia’s invasion of Ukraine in 2022. Central bank gold buying has been one of the biggest factors driving the current gold bull market.

In other words, times change... and they’re changing right now as gold is trending to reclaim its status as the most widely held reserve asset.

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Brien Lundin

About the Author:

Brien Lundin is the publisher and editor of Gold Newsletter, the publication that has been the cornerstone of precious metals advisories since 1971.  Mr. Lundin covers not only resource stocks but also the entire world of investing. He also hosts the annual New Orleans Investment Conference. To get Brien Lundin’s ongoing commentary on the markets at no charge, click here to subscribe to his free Golden Opportunities newsletter.