The Impact of Saudi Arabia Ending Petrodollar Agreement on Bitcoin and Gold

Published on: Jun 13, 2024
Author: Caroline Kong

Last Sunday, a 50-year petrodollar agreement between the United States and Saudi Arabia came to an end, and Saudi Arabia has decided not to renew the agreement. This signifies a shift in the financial world order that has been in place for the past half-century.

The petrodollar agreement was established after the 1973 oil crisis. The agreement stipulated that Saudi Arabia would price its oil exports in US dollars and invest its surplus oil income in US Treasury bonds. In exchange, the US provided military support and protection to Saudi Arabia. Now with the termination of this agreement, which has had profound implications for the global economy, what impacts will it have on gold and Bitcoin?

Effect on USD, Bitcoin and gold

Coin Bureau’s research director Daniel Krupka stated in a brief comment to Kitco Crypto that in the short term, neither Saudi Arabia nor the United States will benefit from the termination of the agreement. Looking ahead, it could potentially reduce Saudi Arabia’s reliance on the US dollar. The end of the agreement might be unfavorable for the US dollar, as Saudi Arabia could choose to convert these non-dollar currency proceeds into other assets such as gold or Bitcoin.

While the future of a BRICS currency remains uncertain, Russian President Vladimir Putin indicated yesterday that efforts are being made within the BRICS nations to establish an independent payment system, free from political pressure, abuse, and external sanctions interference. Some market experts have suggested that a BRICS currency may be backed by a basket of commodities, with gold likely being a part of it, potentially supporting gold prices.

However, most analysts believe that it will still take many years for the US dollar to lose its reserve currency status. Jaime Carrasco, Senior Investment Advisor and Senior Portfolio Manager at Canaccord Genuity Financial, emphasized the replacement of the petrodollar by the PetroYuan contract, which allows for conversion into gold. He expressed the belief that countries such as Saudi Arabia, the UAE, and Iran, like Russia, will be more inclined to accept gold as a means of settling oil trades, rather than using the US dollar.

Carrasco also highlighted that Saudi Arabia’s announcement of joining the mBridge payment system of the Bank of International Settlements would no longer confine the petrodollar system as the sole payment system for energy.

On the social media platform X, a user named Doctor Profit stated that the end of the petrodollar agreement will lead to the US printing more dollars to repay its debts, ultimately exacerbating inflation. Within the next 12 months, it is anticipated that we will witness a rise in inflation, leading to increases in stock, Bitcoin, real estate, and gold prices.


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