The world’s financial landscape is changing…
And it could soon cause a lot of money to move out of the U.S. dollar.
So how do you protect yourself? By following China’s lead.
Let me explain…
On Monday, the International Monetary Fund (“IMF”) announced that China’s currency – the yuan – will join its reserve currency basket.
This basket includes the currencies of the world’s financial superpowers – the U.S. dollar, Japanese yen, British pound, and the euro.
The yuan being added to this basket will give China a new global status. And Steve Sjuggerud says it will cause hundreds of billions of dollars to move into the yuan… and potentially out of the U.S. dollar. Here’s what he wrote in a May DailyWealth essay
Billions of dollars will move into [the yuan] when it achieves reserve currency status. The likely loser in this will be the U.S. dollar – as governments diversify a percentage of their currency reserves out of the dollar and into this currency.
You see, the U.S. is facing an enormous $59 trillion debt problem. The only way for the U.S. government to pay its incredible debt is to print more and more dollars… and debase an already devalued currency. (Every time the Fed prints a new dollar, the value of every dollar in circulation declines just a little bit.) This doesn’t make the dollar all that appealing to investors.
But soon, investors will have a new, more appealing reserve currency to invest in. China is the world’s second-largest economy. In a few years it could be the world’s largest economy. And China has a huge hoard of gold. From January to September, the country added around 1,171 metric tons of gold to its hoard. That’s more than the Swiss government has in its vaults. And in October, China bought another 14 metric tons of gold. China has spent about $70 million buying gold over the past two years.
While it’s probably impossible for China to have a completely “gold-backed” currency, this gold allows the yuan to offer a guarantee more substantial than the dollar, which is only backed by the “full faith and credit of the U.S. government.”
That’s why investors are soon likely to diversify out of the dollar and into the yuan.
So how do you protect yourself from a decline in the U.S. dollar? Follow China’s lead and buy gold…
In November, China has secretly been buying massive amounts of gold as insurance against the U.S. dollar.
In short, thanks to its exports, China’s foreign-currency reserves have swollen from $2.5 billion in 1980 to $3.7 trillion today… So China has had to figure out what to do with all that cash.
Initially, China bought U.S. government bonds. It holds $1.3 trillion in U.S. bonds… the most U.S. debt in the world. But with a dollar crisis likely on the way, China faces a huge problem…
So it has been “safeguarding” the value of its currency reserves. That means one thing… buying gold. Because gold is a real store of value, the price of gold goes up if something bad happens to the U.S. stock market or dollar.
I recommend safeguarding your own wealth against the dollar by buying and holding gold bullion. And with the price of gold down more than 40% since its 2011 peak, there hasn’t been a better time to buy in the past five years.
Take a page from China’s playbook… stock up on some gold bullion. It’s a smart insurance policy as the world’s financial landscape changes.
If paper currencies like the U.S. dollar collapse, gold will still hold value. That’s why Doug Casey, one of the world’s top experts on gold and resource investing, views gold as “cash in its most basic form.”
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