Gold replaces US Treasuries as top reserve asset, ECB says(ft.com)
ft.com
Gold replaces US Treasuries as top reserve asset, ECB says
https://www.ft.com/content/87ef8f25-eb81-4eed-919c-fe5b49a1ac2c
11 comments
>The move was driven by valuation effects - gold purchases actually slowed down last year, but prices (GC00) surged. Using 2023 prices, Treasurys would still be the top holding, at 26% vs. 16% for gold, the ECB said
Gold is back in vogue. Look at the White House, for example. All gold and glitter. Of course, others are trying to immitate the style, hence the demand for gold.
Unpaywalled: https://archive.is/YvcCI
Also, it'd be interesting to know how many and how much $ is going into currency swap lines to avoid bond dumps and keep yields under control.
Also, it'd be interesting to know how many and how much $ is going into currency swap lines to avoid bond dumps and keep yields under control.
Dual reason: partly accumulation, partly mark-to-market.
Central banks have been buying gold aggressively since 2022 as a response to USD reserve weaponization, and gold has rallied 70% in that window.
The headline can be erroneously interpreted as de-dollarisarion.
Central banks have been buying gold aggressively since 2022 as a response to USD reserve weaponization, and gold has rallied 70% in that window.
The headline can be erroneously interpreted as de-dollarisarion.
> Central banks have been buying gold aggressively since 2022 as a response to USD reserve weaponization
> The headline can be erroneously interpreted as de-dollarisarion.
These statements appear somewhat contradictory. If reserves are buying gold instead of dollars and the effect is that the value of gold is increasing, wouldn't the underlying reason still be de-dollarisation?
> The headline can be erroneously interpreted as de-dollarisarion.
These statements appear somewhat contradictory. If reserves are buying gold instead of dollars and the effect is that the value of gold is increasing, wouldn't the underlying reason still be de-dollarisation?
Agree, the nuance is that it’s a sign of de-dollarisation intent and direction, not de-dollarisation achieved. The dollar is still ~58% of global reserves. It would take decades.
> Agree, the nuance is that it’s a sign of de-dollarisation intent and direction, not de-dollarisation achieved.
What does "achieved" mean? The concept of de-dollarization does not entail that dollar use drops to ~0.
> The dollar is still ~58% of global reserves. It would take decades.
This seems to falsely imply that it could take decades before American consumers feel the effects, and it also overlooks the fact that there are realistic if still relatively unlikely worst-case scenarios in which the US loses its "exorbitant privilege" much faster.
The USD was ~70% of global reserves in 2000. Most of that decline isn't actually due to "de-dollarization" per se, but this is the problem: causation is really hard to untangle.
Nobody credible, for example, believes that America's rising borrowing costs are due primarily to de-dollarization, but the rising term premium does realistically reflect investors demanding more to hold US debt.
Erosion of confidence in US fiscal sustainability and institutions is one of the main drivers behind de-dollarization and because it shows up in bond markets as a risk premium, you can't cleanly separate how much of the rising term premium comes from that versus factors like Fed policy and Treasury supply.
What does "achieved" mean? The concept of de-dollarization does not entail that dollar use drops to ~0.
> The dollar is still ~58% of global reserves. It would take decades.
This seems to falsely imply that it could take decades before American consumers feel the effects, and it also overlooks the fact that there are realistic if still relatively unlikely worst-case scenarios in which the US loses its "exorbitant privilege" much faster.
The USD was ~70% of global reserves in 2000. Most of that decline isn't actually due to "de-dollarization" per se, but this is the problem: causation is really hard to untangle.
Nobody credible, for example, believes that America's rising borrowing costs are due primarily to de-dollarization, but the rising term premium does realistically reflect investors demanding more to hold US debt.
Erosion of confidence in US fiscal sustainability and institutions is one of the main drivers behind de-dollarization and because it shows up in bond markets as a risk premium, you can't cleanly separate how much of the rising term premium comes from that versus factors like Fed policy and Treasury supply.
Appreciate the clarification. That makes sense.
> wouldn't the underlying reason still be de-dollarisation?
What are the causes of dedollarization? What does de-dollarization indicate?
Dedollarisation > Causes: https://en.wikipedia.org/wiki/Dedollarisation#Causes
Gold as an investment: https://en.wikipedia.org/wiki/Gold_as_an_investment
Gold has intrinsic value at cost in printed circuit boards, medical equipment, medical devices, space shielding.
Does investing in gold cause growth?
What are the causes of dedollarization? What does de-dollarization indicate?
Dedollarisation > Causes: https://en.wikipedia.org/wiki/Dedollarisation#Causes
Gold as an investment: https://en.wikipedia.org/wiki/Gold_as_an_investment
Gold has intrinsic value at cost in printed circuit boards, medical equipment, medical devices, space shielding.
Does investing in gold cause growth?
> If reserves are buying gold instead of dollars and the effect is that the value of gold is increasing
Central banks and the IMF only own less than 20% of all the gold ever mined: it's probably not the one or two additional percent they bought that made the prices skyrocket by 70%.
For example used supercars and hypercars' values have gone through the roof too: and that's for sure not because central banks are stockpiling those.
Causation / correlation and all that.
Central banks and the IMF only own less than 20% of all the gold ever mined: it's probably not the one or two additional percent they bought that made the prices skyrocket by 70%.
For example used supercars and hypercars' values have gone through the roof too: and that's for sure not because central banks are stockpiling those.
Causation / correlation and all that.
> USD reserve weaponization
The dumbest thing the US has ever done. It's like a tech company intentionally sabotaging its own customer ecosystem...
The dumbest thing the US has ever done. It's like a tech company intentionally sabotaging its own customer ecosystem...