Time in the Market
               Not Timing the Market

GOLD’S FUTURE IN THE AGE OF CENTRAL BANK DIGITAL CURRENCIES: A HISTORICAL PERSPECTIVE

Gold enthusiasts have been promoting a bullish market for years, particularly since the discussion of Central Bank Digital Currency (CBDC) began to surface on social media channels over the last decade. With CBDC now being discussed in mainstream channels, this community is convinced that Gold is the natural asset to peg to CBDC and that gold prices will soar. A decade ago, many, including myself, dismissed this prediction, but now I have a Mona Lisa-style smile across my face, as I now view this as a distinct possibility.

As the world appears to be divorcing from the USD and toward CBDC, it is logical to consider Gold as an asset to peg it to. However, it could be pegged to Bitcoin or even a basket of other commodities. It is critical to remember that implementing a change of this nature takes time, as evidenced by Europe’s adoption of the euro. Which, for those who don’t remember , didn’t happen overnight. In fact, we started talking about it in 1960s, and it wasn’t until 1988 that we reached the master’s record, which stated that on 1st January 1999 , we would finally dissolve our national currencies , to start using this weird currency called EURO.

While we are more technologically advanced now, we must take a step-by-step approach towards achieving this objective of swapping it all out again for a CBDC Utopia.

But the move towards digital currency is already underway, but what impact will it have on the price of Gold? Research suggests that the effect on gold and silver prices will be negligible. This is because CBDC is simply a change in the medium of exchange and not a change in the substance of money.

The evolution from using gold and silver coins to National League-issued currency, then to chequebooks, credit cards, and now to debit cards and electronic fund transfers, represents a progression in the mediums of exchange rather than the substance of money. Sometimes those that haven’t experienced this change in medium are the ones banging the drums of doom across Twitter and other media outlets. It’s pretty decent. Honestly

Those in various circles of FUD believe that CBDC is the start of the “Big Reset” and that central banks will take away citizens’ currencies, power, and freedom.

However, this is irrelevant to the story, as no central bank in the world has indicated an intention to take away citizens’ assets, restrict their powers of movement, or kill off anyone’s freedom. Put it this way, if you are worried about BIG BROTHER watching, or listening to you, then why are you reading this on your mobile device right now ? . CBDC will be good for us all, especially Gold.

While I am inclined to credit the recent rise in price to the introduction of a CBDC being pegged to it, I cannot attribute its sudden popularity solely to this factor. Having been around the block a few times, I recognize that we’ve seen this movie before. 

As the price of gold rises, the prospects of peace tend to fall, an unfortunate reality witnessed in several instances, including WW1/2, the Gulf War, and the Iraq War, among others. Yet, it is not only wars that have caused a surge in gold prices, as financial crises such as the Great Depression and the Dotcom Bubble have also led investors to seek refuge in Gold as a safe-haven asset. For instance, during the Great Depression, gold prices rose by 70% from a low of $20 per ounce, and in the 1970s, gold prices surged by over 2,000% from around $35 per ounce in 1970 to over $800 per ounce in 1980.

No sooner were we packing away flared trousers, hippy loving free the world attitude, the Dotcom Bubble arrived in the late naughty nineties, which saw prices rise by around 60% from a low of around $250 per ounce in 1999 to a high of over $400 per ounce by early 2000. Moreover, in the 2008 financial crisis, gold prices increased by about 25% from around $800 per ounce in early 2008 to over $1,000 per ounce by year-end. This was a significant turning point for many investors, including myself, who recognized the need for a new operating model.

While it is expected that Central Bank Digital Currencies (CBDCs) may influence the price of Gold in the near future, the importance of history cannot be ignored. The ongoing efforts by countries like China, Russia, and other BRICS nations to move away from the USD could further push gold prices up. The future of Gold remains uncertain, but one thing is clear: when wars and financial crises cause financial upheaval, Gold has consistently shone as a reliable investment for investors.

When Gold starts to rise, and its value ascends, the world is at a changing point that never truly ends

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