Gold is once again in the spotlight. Its price has reached a historic high of around $2,600 per ounce. Central banks of several countries are actively purchasing this precious metal. While some countries do this openly, others prefer to keep their actions secret.
Gold Market Trends and Purchases
It is known that China holds much more gold than its official reserves indicate. However, new data shows that Saudi Arabia is also acting similarly. Analyst Jan Nieuwenhuijs argues that since the beginning of 2022, Saudi Arabia has secretly purchased 160 tonnes of gold in Switzerland, contributing to the current rise in gold prices. “It seems that the Saudi central bank has secretly bought 160 tonnes of gold in Switzerland since the beginning of 2022, contributing to the current rise in gold prices,” Nieuwenhuijs notes. “While the Saudis played a key role in the establishment of the global dollar standard in the early 1970s, they might now be the catalyst for its dissolution.” According to Nieuwenhuijs, after the Western countries froze Russia’s foreign exchange reserves in 2022, many countries started actively buying gold.
Gold vs Dollar
The graph shows that total gold deliveries to Saudi Arabia started exceeding consistent individual demand right after the Russian reserves were frozen. In the last three years, US reserves with Saudi Arabia have significantly decreased from $180 billion to $140 billion amid rising geopolitical tensions. Additionally, Saudi Arabia threatened to dump French debt if Russia’s foreign exchange reserves were permanently confiscated. In such conditions, gold reserves become a reliable alternative. Russia and China have been actively accumulating gold for many years, especially since the 2008 crisis and the beginning of the massive money printing by the Federal Reserve.
Bitcoin vs Gold
Nevertheless, Saudi Arabia probably hoped to keep its gold purchases secret to avoid discontent from the US. Unlike gold, bitcoins can be acquired much more anonymously and safely. Everyone remembers the story of Iraq’s gold seizure after the US invasion in 2003. According to former US President Donald Trump, “the dollar must remain the world’s reserve currency. Losing this status would be like losing a war.” Bitcoin offers a significant advantage over gold in the event of a conflict: it can be instantly transferred to a safe place, making it potentially the best means of storing value.
The return to gold that we are witnessing is good news for Bitcoin, whose limit of 21 million makes it a more reliable store of value than gold. We mine more than 3,000 tonnes of gold every year, while 94% of bitcoins have already been mined. Current trends and changes in global politics indicate significant shifts in the global economy.
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