Page 19 - Bullion World Volume 4 Issue 1 January 2024

Bullion World | Volume 4 | Issue 1 | January 2024

could undermine central bank autonomy. Even within the European Union, countries like Poland,
However, this recourse to gold, dormant in reserves the Czech Republic, and Hungary have bolstered
for decades, bears consequential implications. It could their gold reserves significantly. This trend culminated
undermine confidence in national currencies, potentially in 2022, witnessing the highest central bank gold
triggering a shift from fiduciary currencies to gold among purchases since 1968.
emerging market central banks.
Central banks, recognizing the revaluation potential of
Simultaneously, central banks globally are grappling gold, view their gold revaluation accounts as a means
with unprecedented losses on their bond holdings, to shore up balance sheets. However, the use of these
accumulated during years of quantitative easing efforts reserves remains more psychological than formal due to
post the 2008 financial crisis. This period of market technical and accounting intricacies.
support led to substantial asset accumulation, which,
through measures like quantitative tightening, has The spotlight now rests on the United States, prompting
dwindled. The resultant losses on bond holdings, totaling speculation about potential explicit or implicit gold
hundreds of billions of dollars, have strained banks' revaluation in the future. Such a move would mark
balance sheets, leading to collapses and market turmoil. another pivotal stride in gold's reemergence onto
the monetary stage. International market observers
The trend of accumulating gold has gained momentum, and central bankers are keenly attuned to potential
primarily driven by nations east of Germany, reacting developments, particularly post a looming presidential
to perceived currency debasement resulting from election, that could further cement gold's role in the
quantitative easing. China and Russia notably reduced global financial landscape.
their US Treasury holdings, emphasizing gold as a
safer reserve asset amidst Western sanctions. This
shift towards gold has also been observed in emerging
economies like Brazil, India, and South Africa.

Willem Middelkoop, a member of the OMFIF Advisory Board and the founder of the Dutch-based
Commodity Discovery Fund, has played a significant role in the exploration and investment
landscape. The Commodity Discovery Fund, launched in 2008, weathered the Lehman crash
shortly after its inception and demonstrated remarkable resilience by achieving over 300%
growth within three years of the market recovery. With assets under management (AUM)
reaching 160 million euros, the fund has consistently delivered a gross annual return of over
70% four times, investing in successful exploration companies that were later acquired by larger
mining entities.

Middelkoop observes a subtle yet impactful shift in the global financial landscape, marked by the
resurgence of gold in the world's monetary framework. The catalysts behind this revival include
diminishing trust in the US dollar, triggered by the freezing of Russian foreign exchange reserves
post the Ukrainian invasion, leading central banks to increase their gold reserves. The recent
spike in interest rates has caused substantial losses for bondholders worldwide, prompting
European gold-holding central banks to consider leveraging their gold revaluation accounts to
offset balance sheet losses and avoid government bailouts.

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