The gold bears have finally caved under the deafening barrage of fiscal and geopolitical catalysts, from Fed hints to intensely brewing conflict with Iran. But there is one key trend that stands to push gold up beyond $1,700–regardless of the day’s news.
Of course, it’s difficult for the bears to ignore a nearly $50/ounce gain for gold, which is now trading well above its 5-year high.
Not only has the U.S.-Iran conflict reached a boiling point, with Trump readying to deploy an additional 1,000 troops to the Middle East, but the European Central Bank has issued a defiant, dovish tone, saying it won’t hesitate to provide further stimulus: That means rate cuts.
The icing on the gold cake is the US Fed, which has now clearly indicated that it hasn’t abandoned the idea of rate cuts for 2019.
But in this perfect storm for gold prices, EuroSun Mining CEO Scott Moore says we’re overlooking a significant trend that will outlast the current geopolitical meltdown and even the Fed’s policies: It’s a global push for de-dollarization.
“Government’s around the world are becoming increasingly wary of the dollar’s hegemony in international trade,” says Moore. “And they’re doing their best to distance themselves from it by using their gold reserves to buy more gold instead.”
This process is already underway mainly in nations with strong anti-U.S. sentiment including Russia, China, Iran, Venezuela, Syria, Turkey, Qatar, India, Pakistan, Libya, Egypt and the Philippines among others.
Naturally, these countries are turning to gold since the yellow metal is not under lock-and-key like the greenback and other electronic payment methods.
This trend is abundantly clear when you look at central banks’ buying activity.
According to the World Gold Council, central banks purchased nearly 70 percent more gold during the first quarter of the year than they did during the previous year’s corresponding period.
That’s the most they bought since the first quarter of 2013.
For EuroSun’s Rovina Valley project in Romania–the largest in-development gold mine in Europe–the de-dollarization drive will been a boon for the 10 million ounces of gold equivalent they’re hoping to get out of the ground in the simple geography of Romania’s prolific Tethyan Gold Belt.
There are plenty of billionaire fund managers who think today’s ‘crazy’ gold prices are just getting started.
Not least among them is Paul Tudor Jones, who says that gold “has everything going for it”, and sees it pushing to $1,700 an ounce “rather quickly”, as he noted in an interview with Bloomberg.
And this is all just thanks to near-term trends wrapped up in the Fed and wild geopolitics.
We’re interested instead in the long-term trend that is says gold will be a major winner of the global de-dollarization trend.
There’s nothing like a sanctions frenzy to create a major uptick in momentum here.
Most notably, Russia and China have pledged to accelerate their de-dollarization strategies because of Trump’s sanctions push. And they’ve reached a deal to use national currencies for bilateral trade. No more U.S. dollar, then.
So, we’re carefully watching what the central banks are doing.
The latest countries to jump on the de-dollarization bandwagon are Serbia and the Philippines. Serbia is boosting its national gold reserves, increasing them from 20 to 30 tons by the end of this year. It’s shooting for 50 tons by the end of 2020.
Tudor is watching these developments closely, and to him, it suggests an unprecedented shift:
“Remember we’ve had 75 years of expanding globalization and trade, and we built the machine around the belief that’s the way the world’s going to be. Now all of a sudden it’s stopped, and we are reversing that,” he told Bloomberg.
“When you break something like that, the consequences won’t be seen at first, it might be seen one year, two years, three years later. That would make one think that it’s possible that we go into a recession. That would make one think that rates in the US go back toward the zero bound and in the course of that situation, gold is going to scream. ”
Source: eurasiaview. com
