Dollar Weaponization Fuels Central Bank Gold Buying Spree

When the US weaponizes its dollar, foreign central banks are more likely to buy gold. According to Nomi Prins, this is a common reaction to sanctions, frozen reserves, de-dollarization, and currency risk. In fact, every time there is a 'weaponization' of the US dollar relative to other countries, these banks increase their gold buying.

Prins cites the recent use of the dollar as a 'Billy club' by the US against Iranian airlines as an example. This move has prompted central banks to accelerate their gold buying programs. The People's Bank of China, for instance, is now holding all-time lows in Treasury bonds, but its gold reserves have increased.

Prins emphasizes that gold offers a counterpoint to the use of US dollars and Treasuries. Unlike these assets, gold provides appreciation, wealth preservation, purchasing power, and scarcity-driven price increases. As such, any US government or dollar-based action should be examined in light of its impact on gold.