The Gathering Currency Storm: Gold and Bitcoin as Safe Havens

Credits: “Monumental” Reset Looms, Think Twice Before Keeping Cash in the Banks Warns Swiss Banker

The Eroding Value of Fiat Currencies

Over the past decade, governments worldwide have been printing money and accumulating debt at an unprecedented rate. As Clive Thompson, a retired managing director from Union Bank of Switzerland, points out, "as the governments get poorer, everybody else gets richer," leading to a devaluation of fiat currencies.

The U.S. dollar, for instance, has lost 99% of its value since 1933, when an ounce of gold was worth $20. Today, that same ounce costs over U.S. $2,300, reflecting the dollar's steady erosion of purchasing power. This trend is not unique to the U.S. – most fiat currencies have experienced a similar decline, raising concerns about a potential currency reset.

Central Banks Loading Up on Gold

Interestingly, central banks worldwide have been stockpiling gold, with China leading the charge. In 2022 and 2023, central banks bought 50-60% more gold than in any of the previous ten years, according to Thompson. This move suggests that central banks are hedging against currency risks and preparing for a potential reset.

"If you have a lot of gold, you'll be calling the shots or at least sitting at the table," Thompson says, explaining the central bank's rationale for hoarding the precious metal. [Source: World Gold Council]

The Rise of the "Retail Gold" Market

While institutional buyers are accumulating gold, there's also a growing trend of individual investors turning to gold as a store of value. In China, sales of gold jewelry have surged by up to 177% in the fourth quarter of 2023 as the middle class seeks alternatives to real estate and stocks. [Source: World Gold Council]

Thompson notes that the Shanghai Gold Exchange and platforms like WeChat have made it easier for Chinese citizens to buy and hold gold, contributing to the soaring demand.

Bitcoin: The Digital Gold?

Alongside gold, Bitcoin has emerged as another potential safe haven asset, particularly in times of economic turmoil or currency devaluation. Thompson highlights two key advantages of Bitcoin:

1. Borderless Wealth Transfer: Bitcoin allows individuals to move their wealth across borders without the risk of seizure, making it attractive in regions with political or economic instability.
2. Network Effect: As more people accept Bitcoin as a store of value, its perceived value increases, creating a self-reinforcing cycle.

With the recent approval of Bitcoin ETFs in the U.S., institutional investors now have easier access to the cryptocurrency, potentially driving further adoption and price appreciation.

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“Monumental” Reset Looms, Think Twice Before Keeping Cash in the Banks Warns Swiss Banker

Preparing for the Storm

As the clouds of currency devaluation gather, gold and Bitcoin present themselves as potential safe havens for preserving wealth. While the future is uncertain, diversifying into these assets could prove to be a wise strategy for individuals and institutions alike.

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Alternatively, you may want to consider purchasing Precious Metals directly through New World Precious Metals as a tangible hedge against economic uncertainties.

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