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In the financial landscape, which is dominated by debt-backed currencies such as the US dollar, the euro, the Japanese yen and the Chinese renminbi, concerns about debt sustainability and currency devaluation are becoming increasingly prominent. These major currencies, which form the foundation of the global monetary system, are intrinsically tied to the debts of their respective nations. This means that owning these currencies is equivalent to owning debt obligations, so writes Ray Dalio on LinkedIn.
Historical trends show that when risks arise – either from the non-repayment of debt or from the depreciation of the value of money – both the associated debt and the currency itself lose their attractiveness. Typically, when a government is overburdened with debt, its central bank may decide to extra money printing as a mitigation strategy. This action, although it is a serious Debt crisis often leads to the devaluation of money due to inflation.
Gold represents a robust alternative as a non-debt-backed form of money. This is in contrast to traditional cash or bonds, which are susceptible to devaluation due to risks of default or inflation. On the contrary, the value of gold is amplified in times of financial uncertainty with regard to Debt defaults and inflation. This resilience is one of the reasons why gold is held by central banks and why it is one of the most held reserves after the dollar and the euro.
In addition, Cryptocurrencies emerged as another form of money that is not secured by debt, expanding diversification options for investors. While some may argue that other assets such as gemstones and art serve similar purposes due to their portability and acceptance as a store of value, their market dynamics can be quite different from traditional and digital currencies.
In periods of economic stability, when inflation is low and debt is managed responsibly, traditional debt assets and other financial instruments perform well. However, in times of financial turbulence, marked by debt and inflation crises, gold's appeal becomes more pronounced. Gold's ability to act as a financial safe haven makes it an essential part of Diversified investment portfoliosand provides protection against the potential pitfalls of debt-backed assets. In the current times, this also ensures that more and more investors Buy gold.
For investors seeking stability in uncertain times, gold's timeless value remains a wise choice for asset diversification. According to Ray Dalio, this strategy protects your portfolio from geopolitical uncertainties and gives resilience to the investment portfolios.
On Thursday 16 May 2024, Holland Gold will host a event on Gold and world politics in the Georg Kessler Lounge at the AFAS AZ Stadium.
The event consists of three parts: one interview, one presentation and a Q&A session for the audience. For example, the gold rush is discussed in World Politics, the geopolitical tensions that are rising every day; in Ukraine, the Middle East, in West Africa and around Taiwan. What impact does this have on the financial system? Central banks seem to be caught in a gold rush. The yellow metal achieves a Record price. How long will the US dollar remain dominant?
Buy your tickets here: https://www.hollandgold.nl/evenement/
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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
