Daily Outlook

How China & Russia’s De-Dollarization Could Boost Record Gold Rally

China and Russia are ditching the U.S. dollar at a faster rate. In the process, they are indirectly fueling the record gold rally. Since July 1, the price of gold has increased from $1,454 to $2,055 at the most recent peak–a gain of 41.3%. Russia and China’s plans to distance themselves from the dollar-based financial system are not new. In late 2019, Russia, China, and India were considering an alternative to the SWIFT system. In November, India was looking to join Russia’s System for Transfer of Financial Messages (STFM).

In the past month, Russia and China have sped up the so-called “de-dollarization” process. RT, a Russian state-funded broadcaster, said: As a consequence of various factors, including de-dollarization and inflation, the U.S. dollar fell to a two-year low.

The greenback also had its worst month in ten years, which analysts describe as a “relentless” selloff. Gold investors say that the rapid downtrend of the dollar has positively affected the precious metal. Peter Schiff, the outspoken CEO of Euro Pacific Capital, says the weakening dollar had been a significant catalyst for gold: Even as gold builds support just above $2,000 most gold stocks have yet to make new highs for the year. Even the staunchest gold bugs will be surprised by how high the price of gold rises, and how quickly it gets there. A Wile E. Coyote moment for the dollar is fast approaching.

In the near-term, it might get even worse for the dollar. Analysts in Asia say that the de-dollarization plan has now turned into a “financial alliance” between Russia and China. The alliance could pressure the already-battered U.S. dollar, as it struggles to regain momentum against other reserve currencies.

It remains to be seen whether the U.S. government will step in to offset concerns about the survivability of the dollar as a global reserve currency. In the meantime, gold continues to show strong momentum.

How China & Russia’s De-Dollarization Could Boost Record Gold Rally, CCN, Aug 06

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