Central Bank Gold Purchases: Motivated by U.S. Dollar Weaponization
According to Steve Hanke, a professor of Applied Economics at Johns Hopkins University, the recent surge in central bank gold purchases can be attributed to the weaponization of fiat currencies like the U.S. dollar. In an interview, Hanke expressed his beliefs about the future of gold as a reserve asset and how U.S. policies have influenced this trend.
Hanke suggests that the increase in U.S. sanctions, the weaponization of the dollar, and a climate of uncertainty have compelled central banks to buy gold at unprecedented levels. The politicization of fiat money and the growing enactment of sanctions have prompted central banks, especially those in “de-dollarization mode,” to diversify their reserves and reduce their exposure to the dollar.
Rise of Central Bank Buyers
Hanke points out that many central banks that were not actively involved in the gold market have now become significant buyers. This trend is particularly evident among countries like China and Poland, which have increased their gold purchases due to the escalating use of sanctions. Poland, in particular, aims to hold 20% of its reserves in gold and has accumulated 105 tonnes this year.
Bullish Outlook on Gold
Given the current circumstances, Hanke takes a bullish stance on the future of gold. He believes that the fundamentals of gold are strong, even though he does not consider himself a gold bug like Peter Schiff, another renowned economist.
Hot Take: Central Bank Gold Purchases Soar Amidst Dollar Uncertainty
As the weaponization of fiat currencies and the uncertainty surrounding the U.S. dollar persist, central banks are increasingly turning to gold. This rise in gold purchases is a response to the politicization of fiat money and the escalating use of sanctions. According to Steve Hanke, a professor of Applied Economics, central banks that were previously uninvolved in the gold market are now significant buyers, with some countries like China and Poland leading the way. This trend has prompted Hanke to adopt a bullish outlook on gold, citing its strong fundamentals in the current economic climate.
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