Central banks outside the G7 are increasingly turning to gold to protect their economies from mounting debt and geopolitical uncertainty, while Western governments remain reluctant to challenge the US dollar’s dominance, according to Canaccord Genuity Wealth Management senior investment advisor Cam Currie.
Currie, who also leads the Currie Metals & Mining Group, said countries are accumulating bullion as concerns grow over the management of Western economies which seem to refuse to accept a gold standard.
“What we’re seeing here is the rest of the world is going to a gold standard,” Currie told host Adrian Pocobelli on The Northern Miner Podcast. “So, they’re going back to a gold standard because they’re looking at the stewardship of the G7 countries and how mismanaged it is.”
For Currie, countries outside of the G7 are looking to gold as a way to achieve security. The non-yielding metal has become a reserve currency for these countries and is being used as leverage, he said.
“The western world has not really embraced it because of course embracing it is suggesting there’s something wrong with the US dollar and that’s just not going to happen in our world given what’s going on right now,” Currie added. “But that’s what’s happening.”
He suggested central banks have little incentive to publicly endorse a return to the gold standard while they continue building their holdings.
“If you’re still buying it, which these central banks are, why would you want to announce you’re going to a gold standard? You’re still in the accumulation stage,” he said.
Currie believes that rising debt levels and higher interest rates are making gold increasingly attractive as a safe-haven asset, as the metals gain a new place in the discussion.
“That’s why gold has to be part of your asset class because there is a risk building in the debt markets,” he added.
The narrative
Despite the longer-term case for bullion, Currie believes it all comes down to how the story is being told. He noted that when a narrative disappears, money also tends to go elsewhere.
“The narrative right now is playing against us and that’s the opportunity. Price action creates narrative and narrative creates ETF flows,” he said. “The price action is negative, the narrative is negative, therefore, the ETF flows are negative.”
Currie argued that investors should be making moves. They risk missing an eventual shift toward gold if they wait for concerns about government debt to become more widespread. For him, the downside is not making a move now while everything is ‘on sale.’
“The question I have is when are people going to get really concerned about the debt problems and when that happens that’s when the real movement into gold in the western world will really escalate,” Currie said. “And like I said it’s two months from now, two years from now you don’t want to be [thinking] ‘oh I knew it was going to happen but I never did anything about it.’”
Listen to the full episode here: