Discovering the Power of Gold: De-Dollarization and its Impact

By Matthew Piepenburg

Partner

August 8, 2023

• 00:00 In this section, Matthew Piepenburg, partner at Matterhorn Asset Management, discusses the growing distrust of the US dollar and the trend of de-dollarization. He highlights how the Western sanctions against Russia have caused ripple effects and raised eyebrows for other countries, as the weaponization of the world reserve currency has created a sense of distrust. He also mentions the recent BRICS summit in South Africa and the discussion of a gold-backed trading currency as further symptoms of this growing trend. While he believes this is not yet the end of the US dollar as a world reserve currency or fiat money, he emphasizes that the trend of de-dollarization is clearly underway and warns that once the genie of weaponized currency is out of the bottle, it cannot be put back in.
• 05:00 In this section, the speaker discusses the world reserve currency status of the U.S. dollar and the upcoming BRICS meeting. They mention the importance of trust in determining which countries developing nations will choose to align with, highlighting the question of trust in countries like China, Russia, Indonesia, Brazil, and India. Moving on to the U.S. Federal Reserve, the speaker suggests that the Fed realized they raised rates too fast and too high, leading to a pseudo-recession and a break in trust in bond markets. As a result, they took a pause in their tightening policy to give the banks and credit markets a break. The speaker emphasizes that the market’s reaction to the Fed’s actions will determine whether this pause is a precursor to more heightening or an eventual pivot towards liquidity infusion. They also question the reliance of the markets on the Fed and why the central bank has such a significant impact on stock and bond markets.
• 10:00 In this section, the speaker discusses his belief that the US is already in a recession, citing indicators such as the yield curve, the change in the M2 money supply, and the inflation to deflationary moves. Piepenburg also mentions that the labor market will be the next to crack. When asked about gold not keeping up with the equity market rally, the speaker explains that gold is seen as insurance against dying currencies and a hedge against the weakening purchasing power of the US dollar. He attributes the rally in equities to the market’s expectation of the Federal Reserve adopting a more dovish stance in response to a recession. However, he also highlights the stress on the banking system and the potential for more liquidity crises. He suggests that as people realize their currency is getting weaker, they will turn to gold as a means to deal with the low purchasing power of their currency, all of which is held in increasingly beleaguered banks.
• 15:00 In this section, Matthew Piepenburg explains that building investor interest in gold is a subjective matter, as it relies on trust and a loss of faith in fiat currencies. He argues that gold becomes more attractive when it becomes obvious that the purchasing power of the currency in one’s wallet is diminishing, regardless of reported CPI or market discussions. Piepenburg suggests that when countries reach a point of fiscal dominance, where they are unable to effectively fight inflation due to excessive debt, investors will seek an alternative to weak money. For many, this alternative is physical gold, while others turn to more volatile and speculative cryptocurrencies like Bitcoin.