Gold, Oil, and the Dollar: The Reckoning We Warned About

Eight years ago in these blog posts, we advised our friends and clients that Washington’s dependency on foreign creditors would be a problem, and that a “hot showdown” over the Strait of Hormuz was a certainty.  

The price of gold at the time was $1,238.  It is currently trading around $4,500.  Silver was $14.54 then.  Today it is trading in a range around $66.

That is a compound annual growth rate of approximately 18 percent per year for gold and 21.6 percent for silver.  That far outperforms the S&P500 and the DJIA over the same period of 14.5 and 10.3 percent respectively.

Here is what we wrote in December 2018:

A third of the world’s sea-borne oil moves through that chokepoint. US officials like to talk knowingly about how they can keep the Strait open.  They are fooling themselves by overestimating their own capacity and underestimating their opponents.  This seems to be a congenital defect among US strategists, the geniuses who thought the Iraq war of 2003 would be over in days.  

In any event, if things get hot over the Strait of Hormuz, it will realign the major powers of the world, creating explicit new alliances and sorely test America’s geopolitical dominance.  It will change the dollar’s role in international trade and send energy prices to crippling highs.

We warned as well about the risk that China could not be counted on to continue funding Washington’s metastasizing debt.  At the time China held $1.12 trillion of U.S. Treasury debt.  In has shed almost half of it.  

The rough sailing that we foretold on both fronts, foreign creditors and the Persian Gulf, is only going to get worse.

As we detail in these posts week after week, the dollar’s role is changing fast, with new currency agreements and trade settlement arrangements being developed around the world.  We are thunderstruck that so little attention is paid to them and the impact it will have on the American people’s prosperity.  The global realignment is proceeding apace as well.

A trend in force is a trend in force.  If you would like to know more about protecting yourself with gold and silver in the days ahead, reach out to us at Republic Monetary Exchange today.