In a recent interview, Steve Hanke, a professor of applied economics at Johns Hopkins University, discussed how the weaponization of fiat currencies, particularly the US dollar, has led to a surge in central bank gold purchases. Hanke explained that countries in "de-dollarization mode" are seeking refuge in gold as a result of US policies.
Understanding the Rise in Central Bank Gold Purchases
Steve Hanke, known for his critical views on Bitcoin and his advocacy for dollarization, shared his insights on the growing trend of central banks turning to gold as a reserve currency. During an interview on Jesse Day's Commodity Culture, Hanke highlighted the influence of US policies and the uncertain global climate as driving factors behind the increase in central bank gold purchases.
According to Hanke, the rise in US sanctions, the weaponization of the US dollar, and a general sense of uncertainty have prompted central banks to acquire gold at record levels. He explained that the realm of fiat money has become highly politicized, leading to a surge in central bank buying.
"The trend right now is a lot of central bank buying, and the reason behind this is that there is a lot of uncertainty, everything has become more politicized in the realm of fiat money."
As a result, central banks that were not previously active in the gold market are now emerging as significant buyers. Hanke referred to these central banks as being in "de-dollarization mode," aiming to reduce their reliance on the US dollar due to the increasing imposition of sanctions.
A Bullish Outlook
Hanke emphasized that the use of sanctions has been steadily increasing since the 9/11 events, but under the Biden administration, this trend has intensified. He criticized this approach as "utter stupidity," which has prompted countries like China and Poland to ramp up their gold purchases.
Poland, not traditionally a major gold buyer, has accumulated 105 tonnes of gold year-to-date, aligning with its policy of holding 20% of its reserves in gold, as stated by National Bank of Poland (NBP) President Adam Glapiński.
Given the current situation, Hanke has adopted a bullish stance on gold, noting that it appears strong from a fundamentals perspective. However, he clarified that he is not a gold bug like Peter Schiff, another renowned economist.
What are your thoughts on the future of gold markets in the context of de-dollarization? Share your opinions in the comments section below.
Frequently Asked Questions
Is it a good idea to open a Precious Metal IRA
Precious metals are not insured. This is the most important fact to know before you open an IRA account. If you lose money in your investment, nothing can be done to recover it. This includes all investments that are lost to theft, fire, flood, or other causes.
Protect yourself against this type of loss by investing in physical gold or silver coins. These items have been around thousands of years and are irreplaceable. If you were to offer them for sale today, they would likely fetch you more than you paid when you bought them.
If you decide to open an IRA account, choose a reputable company that offers competitive rates and products. It's also wise to consider using a third-party custodian who will keep your assets safe while giving you access to them anytime.
When you open an account, keep in mind that you won't receive any returns until your retirement. Keep your eyes open for the future.
Can I buy or sell gold from my self-directed IRA
While you can purchase gold from your self-directed IRA (or any other brokerage firm), you must first open a brokerage account such as TD Ameritrade. You can also transfer funds from another retirement account if you already have one.
The IRS allows individuals up to $5.500 annually ($6,500 if you are married and filing jointly). This can be contributed to a traditional IRA. Individuals can contribute up to $1,000 annually ($2,000 if married and filing jointly) directly to a Roth IRA.
If you do decide to invest in gold, you'll want to consider purchasing physical bullion rather than investing in futures contracts. Futures contracts are financial instruments that are based on gold's price. These financial instruments allow you to speculate about future prices without actually owning the metal. But, physical bullion is real bars of gold or silver that you can hold in one's hand.
Is physical gold allowed in an IRA.
Not only is gold paper currency, but it's also money. People have used gold as a currency for thousands of centuries to preserve their wealth and keep it safe from inflation. Investors use gold today as part of their diversified portfolio, because it tends to perform better in times of financial turmoil.
Today, many Americans invest in precious metals such as gold and silver rather than stocks and bonds. It's not guaranteed that you'll make any money investing gold, but there are several reasons it might be worthwhile to add gold to retirement funds.
Gold has historically performed better during financial panics than other assets. Between August 2011 to early 2013, gold prices rose close to 100 percent while the S&P 500 fell 21 per cent. During turbulent market conditions gold was one of few assets that outperformed stock prices.
One of the best things about investing in gold is its virtually zero counterparty risk. Your shares will still be yours even if your stock portfolio drops. However, if you have gold, your value will rise even if the company that you invested in defaults on its loans.
Gold provides liquidity. This allows you to sell your gold whenever you want, unlike many other investments. You can buy gold in small amounts because it is so liquid. This allows you take advantage of the short-term fluctuations that occur in the gold markets.
Is gold a good IRA investment?
For anyone who wants to save some money, gold can be a good investment. You can also diversify your portfolio by investing in gold. There is much more to gold than meets your eye.
It has been used as a currency throughout history and is still a popular method of payment. It's often referred to as “the world's oldest currency.”
But gold is mined from the earth, unlike paper currencies that governments create. It's hard to find and very rare, making it extremely valuable.
The price of gold fluctuates based on supply and demand. When the economy is strong, people tend to spend more money, which means fewer people mine gold. Gold's value rises as a result.
On the flip side, when the economy slows down, people hoard cash instead of spending it. This leads to more gold being produced which decreases its value.
It is this reason that gold investing makes sense for businesses and individuals. If you invest in gold, you'll benefit whenever the economy grows.
Your investments will also generate interest, which can help you increase your wealth. Additionally, you won't lose cash if the gold price falls.
How Do You Make a Withdrawal from a Precious Metal IRA?
First, you must decide if you wish to withdraw money from your IRA account. Then make sure you have enough cash to cover any fees or penalties that may come with withdrawing funds from your retirement plan.
You should open a taxable brokerage account if you're willing to pay a penalty if you withdraw early. If you decide to go with this option, you will need to take into account the taxes due on the amount you withdraw.
Next, calculate how much money your IRA will allow you to withdraw. This calculation is dependent on several factors like your age when you take the money out, how long you have had the account, and whether or not your plan to continue contributing.
Once you have determined the percentage of your total savings that you would like to convert to cash, you can then decide which type of IRA to use. Traditional IRAs permit you to withdraw your funds tax-free once you turn 59 1/2. Roth IRAs have income taxes upfront, but you can access the earnings later on without paying additional taxes.
Once you have completed these calculations, you need to open your brokerage account. Brokers often offer promotional offers and signup bonuses to encourage people into opening accounts. You can save money by opening an account with a debit card instead of a credit card to avoid paying unnecessary fees.
When it's time to make withdrawals from your precious-metal IRA, you'll need a place to keep your coins safe. Some storage facilities can accept bullion bar, while others require you buy individual coins. Either way, you'll need to weigh the pros and cons of each before choosing one.
Because you don't have to store individual coins, bullion bars take up less space than other items. However, you'll need to count every coin individually. On the flip side, storing individual coins allows you to easily track their value.
Some prefer to store their coins in a vault. Others prefer to store them in a safe deposit box. You can still enjoy the benefits of bullion for many years, regardless of which method you choose.
- Indeed, several financial advisers interviewed for this article suggest you invest 5 to 15 percent of your portfolio in gold, just in case. (aarp.org)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- 7 U.S. Code SS7 – Designation of boards for trade as contract markets
- 26 U.S. Code SS 408 – Individual retirement plans
- Gold IRA – Add Sparkle to Your Retirement Nest Egg
- Understanding China's Evergrande Crisis – Forbes Advisor
The History of Gold as an Asset
From the beginning of history, gold was a popular currency. It was widely accepted around the world and enjoyed its purity, divisibility and uniformity. Because of its intrinsic value, it was also widely traded. Different weights and measurements existed around the world, however, because there were not international standards to measure gold. One pound sterling, for example, was equivalent in England to 24 carats, and one livre tournois, in France, to 25 carats. A mark, on the other hand, was equivalent in Germany to 28 carats.
The United States started issuing American coins in the 1860s made of 90% copper and 10% zinc. The result was a decrease in foreign currency demand, which led to an increase in their price. The price of gold dropped because the United States began to mint large quantities of gold coins. The U.S. government was unable to pay its debts due to too much money being in circulation. They sold some of their excess gold to Europe to pay off the debt.
Since most European countries were not confident in the U.S. dollar they began accepting gold as payment. However, after World War I, many European countries stopped taking gold and began using paper money instead. Since then, the price of gold has increased significantly. Even though the price of gold fluctuates, it remains one the best investments you can make.
By: Sergio Goschenko
Title: Economist Steve Hanke: US Dollar Weaponization Drives Central Bank Gold Purchases
Sourced From: news.bitcoin.com/economist-steve-hanke-us-dollar-weaponization-has-powered-record-central-bank-gold-purchases/
Published Date: Tue, 28 Nov 2023 08:30:34 +0000