Will Gold Replace US Dollar In 2020?

June 18, 2020

Gold versus Currency

Recently there is a hot topic: When will gold bullion replace US dollar as the major reserve currency?  Will the replacement be realized in 2020?  Given the printing press and the global turmoil with Covid-19 pandemic and warring factions including the Indo-China border and the Korean peninsula troubles, the decreasing role of the US dollar is a matter of time.

In this article we study the role of gold bullion and fiat currencies from a historical perspective.

Gold Rules as Supreme Disciplinarian

Chart 1 – Gold Price in Various Currencies:  2001 - 2019

From the above chart, we noted that very soon gold will emerge another historical height in values in various fiat currencies.  This is Nature’s way of correcting the unceasing printing of currencies, with no solid economic background.  The following section, we demonstrated the broad trend from history.

Learning from History

We showed following two charts with centuries of monetary data showing deep depreciation of all monetary fiat currencies again gold.

Chart 2 – History of Depreciation of Currencies Relative to Gold

1900 - 2017

The above chart showed one depreciation after another when the currency does not match the economic growth.

History of US Dollar Relative to Gold

US quickly emerged as a dominant economic power since World War I.  However there are hiccups along US history as shown in the following chart.  The most notable event is in 1971 when US took the US dollar off the gold standard.                   

Chart 3 – History of Depreciation of US Dollar Relative to Gold

1790 - 2019

It is reasonable to argue that given the expanding global commerce and trade, the old gold standard format needs to be modified as proposed by a few analysts.  It is inevitable that gold be a major part of the new monetary standard in the coming reset in the 2024 time frame.

Important Signal from Silver Price

We believe an important signal as to the timing of gold emerging as a major component of global reserve currency comes from the rising price of silver.  In our earlier articles, we have discussed the Gold-to-Silver Ratio (GSR) and that Silver will also emerge with gold as a safe-haven asset and a de-facto monetary unit.  The following chart reinforces the important role of Silver.

Chart 4 – Silver Price and Gold-to-Silver (GSR) Rattio

We believe that Silver price will rise faster than gold.

Summary

The above is our analysis on the role of gold and silver in becoming a major component of world’s reserve money in the coming Monetary Reset, likely to be in 2024-2025.

“Keep your lives free from the love of money and be content with what you have”

We are not certified or qualified financial advisors.  Please consult your certified financial advisors for actual trading and investing.

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F.T. Dao is a private investor and recently left the corporate world for technical analysis of stock markets.  He holds a PhD degree in physics and has done technical analysis of the market on the side for many years.  He welcomes constructive discussion and can be reached at:  [email protected]  , [email protected]

The California Gold Rush began on January 24, 1848 when gold was found by James W. Marshall at Sutter's Mill in Coloma.

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