The persistent strength of the current gold rush as well as strategists’ confidence it will continue are rooted are attributable to a single, simple reason: namely, the foundational drivers responsible for triggering the metal’s epic run remain every bit as robust today as they were when this all started.

And in the opinion of David Miller, chief investment officer at boutique mutual fund family Catalyst Funds, one driver, in particular – the demand for gold as a dollar alternative – could prove to be the biggest source of price momentum for the foreseeable future.

Catalyst Funds’ Miller: Lowering Exposure to Weaponized Dollars Remains Prominent Concern of Central Banks

In a recent interview with Kitco News, Miller said the desire of central banks to insulate themselves against the risk of suffering dollar-based sanctions by dumping greenbacks for politically neutral gold remains a paramount consideration. Currently, one-third of all countries are operating under U.S. sanctions, including, of course, Russia, which saw roughly half of its total foreign exchange reserves…$300 billion…frozen by the West in 2022 as punishment for Moscow’s invasion of Ukraine.

In Miller’s assessment, the apparent glee with which the U.S. has come to weaponize its currency makes lowering dollar exposure in favor of gold a no-brainer for central banks.

“If you’re a central banker outside the U.S., why would you want your reserves in dollars when we’ve shown we’re willing to take those dollars away if you do something we don’t like?” he said.  

Central Banks Also Concerned About Impacts to Dollar From “Deliberate Debasement”

Miller notes that central banks also are losing confidence in the dollar because of America’s agenda of currency debasement. Strategic debasement can reduce the real value of the debt, thus making it easier to repay in the future with less-valuable dollars. A weaker dollar also can make U.S. goods cheaper – and thus more competitive – abroad. The consequences of such a strategy can be severe, however, and may include inflation; greater loss of confidence in what remains, for the moment, the world’s primary reserve currency; and the market distortions that can arise from artificially low interest rates.

Still, “the U.S. is deliberately debasing its currency by running very significant deficits,” Miller said, adding:

“There’s no indication the government intends to pay that debt down.”

David Miller encourages investors to pay attention to both the expected impact that persistent central bank gold-buying…which exceeded 1,000 metric tons in each of the past three years…is likely to have on gold prices, as well as what central banks’ inclination to help safeguard their reserves with gold says about the metal’s capacity to protect their own holdings.

“I’d rather denominate my portfolio in gold,” Miller declared.

A sentiment for others to consider in this period of exceptional uncertainty?

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