Hudson argues that the gold market is unique and has been historically manipulated by the U.S. to maintain the dollar’s dominance in global reserves. He notes that, unlike other commodities, gold’s price was artificially suppressed for decades to keep global financial reliance on U.S. Treasury securities.
“The aim of this was political—to keep the world viewing the U.S. dollar as the most secure form of international reserves,” he states. However, as trust in the Western financial system declines due to excessive monetary policies and sanctions, nations are turning to gold. The recent sharp rise in gold prices signals the breakdown of this controlled system.
A major concern Hudson raises is the discrepancy between the actual gold supply and the financialized gold market, where much of the traded gold is merely paper-based. The leasing of gold by central banks to private dealers has created a situation akin to a financial bubble, with more claims on gold than the available physical supply.
“This gold drain to satisfy the recent price rise has seriously depleted gold reserves,” Hudson warns, suggesting that when investors demand actual gold rather than financial derivatives, the system could collapse.
He compares the situation to a bank run, where too many people seek to withdraw their assets at once, revealing the fragility of the system.
Looking ahead, Hudson speculates on the potential for a financial restructuring where gold plays a central role. He suggests that countries disillusioned with the Western financial order may seek a new monetary arrangement based on gold or other tangible assets.
“People have wanted to hold gold bullion because it’s tangible, and you know how much you have,” he says, highlighting the loss of trust in fiat currencies.
As global demand for gold continues to surge and supply remains constrained, this could signify a broader transformation in international finance, challenging the longstanding dominance of the U.S. and European monetary systems.
Key Takeaways:
Central banks are stockpiling gold due to fears of U.S. sanctions and asset seizures, signaling distrust in Western financial institutions.
The U.S. has historically suppressed gold prices to maintain the dollar’s dominance, but this control is weakening as gold prices soar.
The gold market operates differently from traditional commodities, with a significant portion of its trade based on financial instruments rather than physical reserves.
A potential “gold run” could occur if investors demand physical gold, exposing the lack of sufficient reserves and destabilizing the financial system.
The shift toward gold suggests a potential monetary realignment, where countries move away from reliance on the dollar and fiat currencies in favor of tangible assets.
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