Value of Gold in a Financial Collapse
According to Aerdt Houben, Director of Financial Markets for the Dutch Monetary Authority (DNB), gold could serve as a hedge when it comes to a worldwide economic disaster. Houben noted that the bank has recently increased its gold holdings and acknowledged the value of gold in a financial collapse scenario during an interview. The monetary authority as of now holds 612 tonnes of gold, worth approximately 35 Billion euros, and these holdings are diversified across numerous locations.
DNB Acknowledges Gold’s Importance
Houben stated that the increased gold holdings are a move that reflects the understanding of gold as a backstop in the event of a financial collapse. These holdings represent 4% of the Netherlands’ Gross Domestic Product (GDP), ranking the country seventh between the top monetary authority gold holdings concerning GDP.
Gold as Insurance
Houben believes that the present holdings of gold by the DNB are sufficient, as it is seen as an insurance against economic collapse. The stability and intrinsic value of gold make it an outstanding commodity to base an exchange rate system. Furthermore, European banks’ increased gold holdings suggest a lack of absolute confidence in the euro, potentially leading to a return to a gold standard. This could likewise indirectly promote people to own gold for protection from financial shocks.
Hot Take
Gold’s value in a financial collapse scenario and the increasing gold holdings of central banks suggest a possible shift back to a gold-based monetary system. This acknowledges the importance and value of gold as a hedge against economic uncertainty.
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