Bloomberg/John Authers.4-18-2023
“I think you see where I am going with this. The US dollar is Amazon, and the Chinese yuan is Walmart. Yes, China would like to dethrone the dollar, but it isn’t that simple. As long as the US is the largest open trading economy, as long as everyone in the world wants access to the US economy, and as long as it is a lot of work and a great inconvenience to switch, the position of the dollar as the global reserve currency is secure.” – Brad McMillan, Chief Investment Officer for Commonwealth Financial Network
USAGOLD note: While we agree with Authers that the dollar will not lose its status as the dominant currency in international trade anytime soon, it is clearly losing ground as a reserve currency. (Please see this morning’s Daily Gold Market Report further down the page.) Alan Simpson, former Wyoming senator, once referred to the dollar as “the healthiest horse in the glue factory.” All said, gold does not need de-dollarization to continue moving higher. Likewise, the dollar can still decline against other currencies despite its exorbitant privilege (as it has in the past). The more critical factor for savers and investors is the ongoing erosion of the greenback’s purchasing power since 1971 and the attendant increase in the price of gold, as shown in the chart below.
Gold and the purchasing power of the US dollar
(1971 to present)
Chart courtesy of TradingView.com • • • Click to enlarge
