Why Gold Will Benefit from the Inevitable Reshaping of the International Monetary System
- Why Gold Will Benefit from the Inevitable Reshaping of the International Monetary System
by Ronni Stoeferle, https://goldswitzerland.com/
Intro by Matthew Piepenburg
In the attached report, Matterhorn Asset Management advisor and Incrementum AG founder, Ronni Stoeferle, offers a compelling perspective on the rapid changes in the global monetary system and the massive implications behind Western sanctions unleashed on February 27th against Russia.
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As Ronni indicates, these measures have staggering and far-reaching consequences for global markets, currencies and the gold price. Recent sanctions and the “militarization of money” designed to target Russia are in fact hurting the West in equal, if not greater, measure, especially with regard to the weakening prominence of the USD and euro.
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As Putin moves to trade more in RUB, other nations, including China and India, will tilt ever more toward de-dollarization in future agreements as global trade becomes increasingly multi-polar and multi-currency.
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Sanctions confirm that the USD is no longer a neutral currency, but rather a highly politicized weapon. Escalation or de-escalation in Ukraine, the world is now recognizing the growing likelihood of de-anchoring from the USD as a world reserve currency. This, of course, will not happen over-night, nor will the Yuan simply emerge as the preferred currency.
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Nevertheless, trust in fiat currencies as a whole is falling and thus forcing the inevitable issue of a needed (as well as neutral and real) asset like gold to partially cover future currencies as the global monetary order drifts toward a new era.
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Toward this end, Ronni provides critical data regarding current gold coverage ratios for the major world currencies, reserves and central banks, including rising EM demand for gold. As the world monetary system re-organizes, those nations with the most gold will have the most currency credibility, and even a loose gold anchoring behind those currencies is a likely (as well needed) component of this rapidly-shifting environment. Based on M1 and M2 data, Ronni walks through the potential impact such partial gold-coverage can have on the actual (rather than COMEX-manipulated) price of gold.
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We think the implications are more than worth a thorough read.
-Matthew Piepenburg
1) The World Monetary System Is Undergoing an Epochal Upheaval
February 27, 2022, will go down in economic history as a major caesura, an epochal turning point. On February 27, the member states of the European Union declared Russia’s currency reserves unusable. This was a coordinated action from within the US, Great Britain, Japan and other states that are classified as part of the Western world. In addition, Russian banks were excluded from using the SWIFT system and thus cut off from the international payment network. The media spoke of a “militarization of money” that would dry up Russian war funding.
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However, shortly after the sanctioning of currency reserves, the first doubts arose as to whether this step might not seriously damage the West in the long term, more specifically the US dollar and the euro. The US and the euro area signaled that the globally significant US dollar currency reserves could be unilaterally declared worthless in one breath – at least temporarily. The same is true of the euro, which, while playing second fiddle to the US dollar as a global reserve currency by a wide margin, is Russia’s largest foreign currency holding, making up 32.3% of its foreign exchange reserves.
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