While most American investors have faith that the Federal Reserve can and will successfully tighten monetary policy to fight inflation — or have simply bought into the “transitory” inflation narrative — Germans are loading up on gold as a hedge against growing inflationary pressures.
In a podcast, Peter Schiff said it smells like stagflation is on the horizon. Inflationary pressures are becoming more and more apparent. Labor costs, commodity prices and bond yields are all pushing upward – clear signs of inflationary pressure. And of course, defined correctly – as an increase in the money supply – there is no denying inflation is rampant. We saw a record increase in the money supply last year. The only time that even comes close was the stagflationary period of the 1970s.
But what does this really mean for you and me?
Over the last couple of years, we’ve been reporting on efforts to remove the US dollar from its throne as the world reserve currency. We’ve primarily seen moves toward de-dollarization from countries like China and Russia, and other nations within their orbits. It’s easy for Americans to dismiss efforts to undermine the dollar as desperate moves by their enemies that will never gain any kind of international traction. But now we’re beginning to hear the same de-dollarization rhetoric from American allies.
Earlier this week, German foreign minister Heiko Maas called for the creation of a new payments system independent of the United States.
The classic image of this is the scene from the Christmas-season film It’s a Wonderful Life, with Jimmy Stewart. We’ve all seen it. Now, something similar is happening at the Federal Reserve Bank of New York. What’s different is that the run on the bank involves gold, not cash. The New York Fed will never run out of cash because they can print all they need. But they could run out of gold.”
The Germans are showing off their gold.
The country ranks second in the world only to the US in official gold holdings. This week, the Bundesbank launched a six-month exhibition on gold showcasing its reserves along with the bank’s most interesting gold bars and coins. The official exhibit is part of a renewed emphasis on the yellow metal in Germany.
Over the last several years, a number of countries have taken steps to bring their gold home.
You can now add Hungary to that list.
Global gold-backed ETFs increased their holdings by 197.5 tons in 2017, an increase of 8.4% in global assets under management, according to the World Gold Council.
Globally, gold-backed ETFs collectively held 2,363 tons of gold at the end of 2017, valued at $98.1 billion.
There are signs that December was a strong month for global gold demand.
Gold exports from Australia surged from August to September, according to data released by the Australian Bureau of Statistics (ABS).
Non-monetary gold exports rose 17% in the period, an increase of $217 million in seasonally adjusted terms.