Countries around the world increase their gold reserves as uncertainty about the future of the dollar-based system provoked by Washington’s trade wars and aggressive politics is growing, several analysts told RT.
‘It’s time to worry about the biggest economies’
“In the near future, we can see major changes in the rules of the game,” said Mikhail Maschenko, an analyst at eToro’s social network for investors, who recalled that earlier this year developing countries “were the first to feel the panic of investors “.
“If a crisis in Latin America and South Asia does not surprise anyone, now is the time to worry about the biggest economies in the world,” said the analyst.
For him, the “aggressive policy” by the US of recent years has forced some countries to “seek an alternative to the dollar and replenish their gold reserves,” while concerns about the future of the global economy are “an added incentive” to such purchases. In addition, “many question the protectionism of Donald Trump,” he added.
‘The only alternative’
Denis Lisitsyn, an analyst at FinIst, shares the same view and listed a series of signs of the possible collapse of the global financial system headed by the US dollar. Among these indices are the uncontrolled issuance of money in different countries, rising US interest rates, trade wars, rising energy prices, geopolitical tensions in Syria and Iraq, or the war in Yemen.
In these circumstances, “many countries are buying gold in advance” because they understand “that paper money is constantly consumed by inflation, the stock price will fall dramatically in case of crisis and deposits abroad can be arrested, confiscated or frozen,” explained the financier.
Hungary, Poland, Russia, China, India, Turkey and Saudi Arabia are accumulating their gold reserves, said Vladimir Rozhankovsky, a specialist at the International Financial Center.
According to him, there are “few alternatives to US Treasuries” in terms of volume and market liquidity, but “prudent countries want to increase their reserves” and gold is indeed “the only” option.
Support in times of crisis
Mark Goihman, an analyst at TeleTrade, also points out that the price of gold generally increases during times of crisis and can serve as additional support for the national currency.
In addition, “many countries, particularly China and Russia, are turning to gold as opposed to reliance on dollar dominance,” at the same time “reducing dollar assets in their reserves,” he said.
Lisitsyn recalled that this trend is seen not only in China and Russia. Germany, meanwhile, repatriated more than 300 tonnes of gold and the Netherlands returned about 100 tonnes of ingots. Turkey bought 187 tonnes last year and also withdrew gold from the US Federal Reserve, while Iran used the precious metal to stabilize its economy.