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Central Banks Fleeing the Dollar for Gold! Should You Follow Their Lead?

by Rachel MillsApril 30, 2024
dollar bill folded to look like a boat floating in water

What is that old saying about rats on a sinking ship?

In his most recent investor letter, David Einhorn gave his observations on rising gold prices and what seems to be driving this trend. He noted the seeming outflow of gold from west to east. Meaning, eastern countries seem to be buying a lot, and western countries are selling a little, leading to high prices as that imbalance increases.

“Perhaps the West is running out of gold it is willing to sell, while Eastern demand has remained strong enough to force the price higher,” Einhorn theorized.

Business Insider notes that the People's Bank of China has increased their gold holdings by 16% in the last 17 months. India and Singapore are also big net buyers. 7 in 10 central banks expect to increase their position in gold this year, vs 6 in 10 the previous year, according to the World Gold Council.

We detail more about the trend to de-dollarize in our newest report - "Digital Dollars, De-Dollarization and Debt - and the Case for Gold as Your Best Defense" - COMING SOON!

As more and more of the big movers in the financial world turn towards gold, what does that mean for you? Should you follow their lead? What do they know that the rest of us are only left to guess about?

Rats on a Sinking Ship

The old sayings about rats fleeing a sinking ship come to mind. The lore harkens all the way back to the days of wooden sailing vessels. One telltale sign of doom was a swarm of rats fleeing to the upper decks. No, they didn't have some kind of special knowledge about the future. They simply lived in the lower berths and cargo holds where humans didn't spend a lot of time. Thus, they were frequently the first to realize the ship was filling up with water and about to sink. When you saw a swarm of rats headed for the upper decks, you would be wise to follow so as not to get trapped in a lower deck as the boat went down. Follow the rats to save yourself.

Central bankers spend their time deep in the underbelly of the financial world, looking at balance sheets the public doesn't get to see. They would be the first to see that the economic system is taking on water and its time to head for the lifeboats.

Is that lifeboat gold and silver? Are you diversified outside of the dollar in case it begins to sink? If it becomes more and more apparent that we are in real danger, demand (and prices) for gold will just go up and up. Think of seats filling up on the lifeboats... Will you make your move in time? Call us to get started.

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