…In response to escalating sanctions from the U.S. in particular on Russia, and now China too, Putin declared last Wednesday that “unfriendly” countries—namely the U.S. and all EU countries— must pay for their natural gas in rubles. This is a huge development – a potential game-changer -specially given that Saudi Arabia is considering selling oil to China in yuan instead of dollars. That creates tremendous concern about the remaining lifespan of the Petrodollar. Taken together, the fate of the dollar’s role as the global reserve currency is increasingly under threat.
This version of the original article by David Brady from sprottmoney.com has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
…The dollar is on an increasingly fragile ground here with the prospect of two commodity-backed currencies, the ruble and the yuan, challenging its reserve status.
#$$4$ People look at the DXY and say the dollar is doing just fine but the DXY is rising because the dollar is rising against the euro and the yen. All that means is that the dollar is devaluing at a slower pace than the euro and the yen. All fiat currencies are being devalued to some extent or another due to soaring inflation everywhere, but especially in the West. All you have to do is look at what has happened to all commodity prices recently. It also explains why Gold and Silver remained resilient despite a rising dollar and soaring nominal and real yields recently. The dollar’s days as the global reserve currency appear to be a few geopolitical headlines away if this continues or, more likely, gets worse. What happens to Gold and Silver?
…It makes sense to hike rates to stem the rise in inflation, or better, reduce it but they are doing so into an already slowing economy…[but] that seems to be the intent, to create a recession in order to bring down inflation. Reduce demand for goods and services and thereby force prices to slow their ascent but how far are they willing to go?
Housing markets are already decelerating as mortgage rates soar and mortgage applications are evaporating. I believe it all depends on stocks. When the S&P falls hard again, perhaps to a lower low, the Fed will be forced to revert to zero rates and QE to avoid a systemic collapse…[and] when the Fed opens the floodgates of liquidity again, inflation will resume its upward trajectory, bearing on hyperinflation. If 2020 and 2008 are anything to go by, Gold and Silver will go vertical at that point.
Following the ensuing melt-up in everything once the Fed and other central banks go Zimbabwe on currency printing, I expect the Greatest Depression to begin in earnest sometime in 2023, latest 2024…[and] if that does play out, Gold and Silver will likely outperform every other asset. That’s the beauty of precious metals, they outperform almost everything else in the extreme situations of inflation, stagflation, hyper stagflation, and deflation. I struggle to find any other assets that can provide such insurance and performance under those circumstances.
…In summary, while the short-term remains uncertain for Gold, Silver, and the miners, especially given the record short position of the Bullion Banks, I believe they will all begin to soar to new record highs this year, perhaps sooner rather than later.