Reserves Alchemy

Central banks are selling US treasuries and MBS. You can see the trend in the charts below. They have been, for the most part, buying gold instead of buying or holding US bonds. The trigger was the confiscation of Russian assets at the beggining of the Ukraine war, but the fiscal situation in the US has perhaps depended the concern about the strength of the U.S. dollar as a long term store hold of value. Gold has been sold (or swapped) during the Iranian war by Turkey and by UAE to defend their currencies during the oil shock, but the trend is resuming as the conflict is seen to be reaching its end (we’ll see). Gold reserves have surpassed US bonds in major central banks, in part due to purchases and, in part due to the revaluation of gold, not only in dollar terms, but in a by fiat currency terms. Perhaps the biggest lesson the Iranian conflict is unveiling is that the empire financial situation is not what is just to be, and diversifying away from the dollar is a must. Gold has proven to be an effective, liquid reserve, that can be quickly (abruptly perhaps) transformed into other currencies to be used to defend bank runs or a currency dump. U.S. Long term bonds are not longer the preferred choice, or so it seems. Central banks are successfully performing medioeval alchemy, converting bonds into gold. Dire implications for the U.S. economy.

Want to know more? You can register for free at Fund@mental.

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning #policymistake #ratecut #stagflation