Gold’s Comeback: Why Central Banks Are Turning Away from the Dollar

In the interview we talked about the historically strong inverse correlation between Gold and the US Dollar breaking down, demonstrating that investors were becoming less sensitive to actual prices in local currencies, they just wanted to have gold in their portfolios. We also discussed the fact that the rate of Central Bank buying was at its strongest level since the Bretton Woods system broke down in the late 1960’s. The motivation then was that USD debt levels were getting out of control partly due to spiralling costs of the Vietnam War but more importantly, countries that were effectively pegged to the dollar wanted to protect themselves against dollar devaluation, hence they bought gold. The parallels that we see today are very similar and therefore it’s no surprise that central banks are displaying their lack of confidence in the USD by buying gold again.