U.S. Push for Dollar Depreciation Could Drive Gold Prices to $15,000 by 2030

U.S. Push for Dollar Depreciation Could Drive Gold Prices to $15,000 by 2030
Published on: Jun 17, 2024

The United States is deliberately abandoning its economic policies of the past 40 years, which will have a huge impact on all assets, including U.S. Treasury bonds, the US dollar, gold, and Bitcoin. Specifically for gold, it is believed that the US dollar will be revalued and depreciated, leading to U.S. Treasuries being abandoned as global reserve asset. This will trigger a doubling of gold prices, with expectations that by 2030, gold prices will rise to between $7,000 and $15,000.

Over the past few decades, the United States has gradually evolved into a net exporter of debt, but now the situation is changing. The U.S. government sees a return to commodity exports as a national security issue, and to achieve this, the US dollar must be devalued.

The US dollar system is dying, and the era of USD hegemony has peaked. The proportion of the US dollar in global foreign exchange reserves has been declining, from 85% in 1979, to 73% in 2001, and to 59% in 2024. U.S. Treasury bonds are losing their status as the world’s primary reserve asset. Since 2014, global central banks have net sold $400 billion worth of U.S. Treasuries, and the gap between supply and demand for Treasuries is widening, prompting the revaluation of the US dollar.

Globally, what assets can replace U.S. Treasuries?

As U.S. Treasuries are being offloaded, another global reserve asset, gold, is on the rise. Since 2014, global central banks have net purchased $600 billion worth of gold. The market has already sensed this shift. So far this year, gold prices have increased by 12.5%, frequently hitting record highs, and are expected to continue rising up to 2030.

The U.S. Treasury market is valued at $130 trillion, while the gold market is approximately $14 trillion, with an annual output value of $240 billion. If the proportion of U.S. Treasuries in global reserve assets decreases and gold re-emerges as a major reserve asset, gold prices will see significant increases. In 1989, the ratio of the value of U.S. official gold to the value of foreign-held U.S. Treasuries was 20%, compared to 134% during the dollar crisis of 1979-1980. Today, it has dropped to 7%.

Moreover, the pricing power in the gold market is also shifting. After World War II, the United States held 75% of the world’s gold reserves, but now this share has dropped to 22%. Even if the U.S. wanted to suppress gold prices, its ability to do so is no longer as strong as before. Meanwhile, during the latest gold rally, Asia, and particularly the Chinese gold market, is transitioning from price taker to price maker.

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