This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Nothing has displaced the US dollar as the world’s favored reserve currency. But gold (GC=F) investors are giving it a shot.
The safe-haven asset is welcoming with open arms the money flowing out of team greenback as political instability, government debt, and the whims of central banks gnaw at the power and influence of fiat currencies.
Gold’s epic run-up coincides with threats of financial turmoil. Instead of competing alongside the dollar and longer-term bonds as places to park your money until trouble passes, gold’s rise lays bare the downgrade of other financial shelters. If gold has taken its eponymous medal, there are losers who have lost the competition.
What’s been dubbed the “debasement trade” underscores not just a loss of faith in fiat currencies but a rebalancing of risks and a reorientation of policy solutions to rising government debt.
The US dollar index (DX.Y.NYB) has declined nearly 9% year to date, reflecting those trust issues.
If gold crossing the $4,000-per-ounce mark for the first time signifies a major flight, it echoes earlier periods of heightened inflation and economic instability.
The flight to safe havens is also a peculiar one this go around. As this newsletter has noted, stocks are at record highs, and investors are flocking to what looks like an impervious profit machine from corporate America.
Crypto is enjoying its moment in the sun too. Bitcoin (BTC-USD) breached a new record high this week, performing like its devoted backers have long said it would — as a hedge and a preservation of value. While analysts don’t have the historical parallels to draw from, bitcoin in this moment is (finally) behaving like gold.
Only this time, gold is also behaving like gold — and conceptually stealing bitcoin’s thunder in the process by being a store of value without all the fuss, volatility, or baggage. All it does is shine.
Still, picking at the differences among this season’s winners is a lesser point to what they are beating out. Investors are running at hard assets and crypto as an answer to what’s perceived as unsustainable government spending and the mounting debts that follow as a consequence.
Economic growth is one way out of the debt quagmire. That’s in part fueling the gold rush, as expected lower rates tend to lead to higher gold prices. But there are broader forces at play.
