April 3, 2025 - 2:30pm
Gold reached new highs in the lead-up to Donald Trump’s tariffs announcement yesterday. Though it has now slipped just below $3,100 an ounce, its rapid rise this week forced analysts to revise their target prices. Had gold been bought at the turn of the millennium, the investment would have increased 12 times over during the interim — three times the increase of the US stock market in that same period, and twice the return in New York real estate.
You have to go back half a century to see gold behaving this wildly. What is going on is pretty clear: amid rising geopolitical uncertainty and risks of a global trade war, investors and central banks alike are stockpiling gold, the most ancient safe port in a storm. But just why they are doing this is the more intriguing question.
A common explanation is that gold has become a safeguard against inflation and currency debasement. However, gold didn’t move all that much during the pandemic surge in prices, and it only really took off once inflation had come back down. As for debasement, since 2008 the most successful hedge against currency debasement — in fact, an invention created expressly to exploit debasement — has been Bitcoin. Yet since the start of the year it has floundered, despite Trump’s patronage. The price of gold against Bitcoin is now rising, which suggests investors may be losing faith in crypto as well.
This could point to the reason for the turn to gold, particularly among central banks: its rise may be the flip side of the dollar’s decline. Its 20% increase since the start of the year would, if annualised, amount to a near-doubling, but the precious metal has been more restrained against other world currencies such as the euro and the yen.
That’s because against a basket of global currencies, the dollar is down some 6% since the start of the year. It may be that the high degree of volatility and arbitrariness which Trump has injected into the world economy is causing foreigners to tiptoe to the exits. Equally, his backing of crypto and pledge to create a Bitcoin reserve may have turned the digital currency from a perceived alternative to the dollar into something intertwined with it. As the dollar’s appeal has waned, so perhaps has Bitcoin’s.
If there is such a trend against the dollar, Trump didn’t start it. Hesitancy about the currency predates him, and it didn’t feature prominently in his first term of office. Nevertheless, his second administration may be accelerating the emerging tendency. The increasing weaponisation of the dollar in sanctions regimes in recent years, which has now been joined by his team’s talk of dubious schemes such as the Mar-a-Lago Accord, may be souring the world on the US currency.
All told, we may be in the very early stages of the search for alternative reserve currencies, as it appears that central banks are selling some of their dollar assets and parking the receipts in gold. The metal has always played a role in global currency reserves, and it may now be a stop on the route to other stores of value. Because no other economy has the open financial system and deep pools of capital the US has, there is no obvious replacement to the dollar as the world’s reserve currency — at least not yet.
That doesn’t mean, however, that the search for alternatives hasn’t begun. And if so, given the volume of foreign money tied up in US stocks and bonds, America could be in for a painful economic future.
John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).
jarapley
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SubscribeThe second last paragraph is not exaggerated. It hits the nail on the head.
I am just embarrassed at this point! It is starting to look a lot like something very deep is broken and we do not know what it is>
Look at that pictue. A case can be made that most of the trouble through history has been caused by little men.
Macron specializes in embarrassing and destabilizing France.
No perrdon may be ELECTED more than twice. But if election were delayed in 2028, President Trump would continue to bec President. Democrats and neolineral media lack imagination
There is no transplant to remedy that .
God, what a depressing photograph at the top!
Such a pair of lightweights.
Measured, unlike our hyperbolic leaders. Macron and Starmer.are birds of a feather with the fractious temperaments to match. Scholz is yesterday’s.man, and Meloni is staying well out of it. Is this really the best we.can do? They say cometh the moment, cometh the man. Candidly I’m sick and tired of waiting for them to arrive and am certainly not holding my breath.
Maybe Kemi is the man you are waiting for … lol … intended in the same sense of the earlier comment calling for Lammy to sort it out!
Europe is governed by committee. And we all know how well committees work. Especially when the committee is also comprised of pampered, weak, socialists afraid of their own shadow and terrified of free speech, muppets who cry at mean words.
Starmer is a disaster for the UK, too, falls under the description above.
You’re all doomed.
Finally, a voice of reason! Nobody, not Trump or Hegseth or Vance, has said the US is withdrawing from NATO, beyond some vague allusions regarding defense spending levels.
Put bluntly, Europe is geo-strategically useful the the US as it keeps Russia off the Atlantic coast, is a significant economic entity, and as the author says is a bridge to other areas of interest, starting with MENA. But, you can spare us the hollow cant words about “shared values” when EU ministers and national leaders tell the US we must censor our own internal debates.
Regarding Europeans as peacekeepers in Ukraine, claiming something that has absolutely no credibility is not a bargaining chip to trade in return for something else, it just makes you look silly. In the mid-1990s, the European members of NATO were keen to intervene in Serbia, on a very small scale compared to what Ukraine would require, a few regiments, really. Even then, before their Cold War militaries had been abandoned and near NATO’s heart, they were incapable of doing so without US logistics. The European militaries have gotten smaller and weaker since then. To claim the ability to occupy and enforce an enormous front between Ukraine and Russia is obviously silly and nobody who matters is fooled.
A combined European force is a laughable idea. Half would insist on their right to have weekends off, several countries would try to establish dominance, some nations would refuse to be a part of it. Neither Europe nor the EU is united. Countries have their own strategic interests and wholly different approaches about how to deal with a neighbouring bully. Some countries border Russia and are now, with US and various European stances, that they will be left to their own sorry fates by the EU, UK and US. Pity the Baltic states and eastern and Central European nations! Pity is all they will receive until the major Western powers have woken up to the fact that they are repeating the same old mistake of appeasement.
I disagree that this is appeasement from the USA. Russia is not the Soviet Union in scale or capability. The EU has the wealth to build a viable defence if it truly felt threatened.I think Nord Stream 1 was built after the Georgia invasion, and N.S. 2 after the Crimea invasion. I could be wrong on the dates but clearly Germany and others had no problem with Putin back then, and Merkel said as much in her biography…This is an EU problem and the USA has a govt debt problem that needs to be addressed so no spending on a non-NATO problem facilitated by the EU for a long time
If Europe wants to be taken seriously, if it wants to be an actor in its own affairs, Europe must have a leader, not “leaders”. Nothing can have more than one leader and be an entity. Many Lilliputians do not make one Gulliver.
Help! We need Lammy to sort this out!
This is the crucial passage. European leaders have over time allowed themselves to forget two important facts.
First, that without American backing the Russians don’t fear the rest of Europe. Whatever the delusions in Brussels, there simply is no single “Europe” to stand against them. A pan-European force would at best be a coalition of reluctantly willing nations which would find it very difficult to maintain the operational integrity, political will or popular support necessary to conduct a long, drawn-out ground war against a nuclear power.
Second, that keeping the Americans onside requires a degree of, let’s call it, diplomatic flattery to be maintained. There has always been an anti-Atlanticist element on the European left, of course. But over the last two decades dismissiveness about America and their contribution to European security has crept into even mainstream political rhetoric across Western Europe. This was careless at best and recklessly delusional at worst. It could only last so long before the Americans shrugged and said, fine, all yours then.
Now, as someone once said, the air is thick with chickens coming home to roost.
I suspect the plan is to get cheap gas on tap again. Britain perhaps not, because they prefer their citizens and business sector to be bankrupted in order to prosecute a proxy war for the Americans.
Yes, one thing is for sure – the EU is not on our side.
Starmer’s phony tough guy posturing is really effeminate. So much of the British elite is like this.
This was a truly embarrassing intervention by 2tk. Doesn’t he understand that the whole point of the war for the Russians is to keep NATO out of Ukraine? Everyday brings fresh evidence that we’ve elected our very own Biden.
At least he had senility as an excuse.
Leaving the Paris meeting, Chancellor Olaf Scholz of Germany said that a discussion of European troops for Ukraine is “completely premature” and “highly inappropriate” while the war is ongoing.
Why would anyone listen to this guy? On Sunday, he’s history.
The Europeans can cry and pump out anti-US headlines all they want (“The US is trying to divide Europe” was I think the most idiotic this morning -predictably on an Austrian news site – I honestly don’t know why I even bother to look at them anymore): the US want the war ended and simply can’t be messing about waiting for the Europeans to get to a consensus. Which, when they get to it, probably won’t be realistic or useful anyway.
Starmer does come across as pathetic with these promises of troops – but I do still think the role of intermediator between the EU and US is open and necessary.
This is because many Europeans still believe that it’s the EU that has been keeping the peace in Europe all this time: American security guarantees don’t figure that much in their thinking, even among the highly educated. (In fact they’re sometimes even more naive.) So these new developments are literally blowing their minds. Equally, I’m not sure to what extent Americans understand this aspect of the European mindset.
The British – even the pro-EU among you – have never been so romantic about the EU or European security. So I do think the UK government can be useful here as a “translator” of sorts. I think might be a good way of limiting damage to the Transatlantic relationship as I can see now that there is very little understanding of (or will to understand) what the Americans are doing or why, or that they do want the best for us. Just hostile, kneejerk reactions.
You can always tell when Starmer is wrong – his lips move.
He will be remembered not as a futile prime minister but as the man who looked the other way during the rape of 12,000 white girls over a decade and the giant post office scandal.
Starmer would be a great mediator if, and only if,
1) His main aim in life was not to rejoin Europe.
2) He had some character and could use that to impress people. His background means that he needs to define every detail and mediators don’t work in detail, they work in ideas and dreams.
Now the more experienced politicians in Europe will egg him on with nudges and winks to suggest that the UK would be welcomed back into the fold, and send him out to make a fool of himself.
I think you are spot on!
I don’t think anyone wants the UK back inside the EU. In the single market, maybe – but not as a member. Far too much trouble!
I suspect you’re right. EFTA, anyone?
Reading your comment about Scholz being history after Sunday, led me to wonder why Macon called his big meeting for this week rather than next week.
Tentative conclusion–it’s all for show, and was never meant to accomplish anything beyond some photo ops and press statements. As if “soft power” consists of that and need not be backed by anything real.
Sikorski threatening Trump with not getting a Nobel Prize, as if that empty award is really important to the future of America and Trump cares, speaks volumes about the hollow and corrupt European leadership class that cares about personal prestige and wealth, but not about their countries or the people in them. They see Trump, who sacrificed wealth and comfort and prestige–and very nearly his life–because he thinks his country is in trouble and he can help, and they both cannot understand him and see him as a threat if their own people ever notice the difference.
A general comment on the whole charade–it’s almost like 1956, Suez and Hungary, never happened as far as Europe’s (including UK) rulers are concerned. Really, pretty amazing.
I write from Chicago, btw.
The German response shows Starmer does not understand Europe.
But we knew this already. It’s true of all Remainers/Rejoiners.
We’re better off and safer out.
Europe is just one in a long list of things that Starmer doesn’t understand: democracy, economics, Islam …
Let alone Chagos.
You forgot to mention human biology.
Because the establishment are never going to let us find out for ourselves, I don’t know where I stand re your last statement.
However, the first two are absolutely spot on. The level of ignorance of these people is only matched by their emotional incontinence on the subject. They spout borderline nonsense, bearing little or no reality to the more measured tones of those they would have us worship.
Emotional incontinence.
Nice!
Why did Starmer so unnecessarily subject himself to public humiliation by so publicly flying a kite for a UK peacekeeping force backstopped by the USA, something so obviously unacceptable to the USA and Russia even before he opened his mouth?
Starmer and the EU in tandem are slowly adjusting European public opinion to “accept” “irreversible” European weakness. For an elite that actively promotes Global South mass migration as an economic cure for invented economic problems, it makes total sense to adopt the same solution for military defence. But first they need to foster irrefutable “logic” to permit a Global South army to occupy a part of Europe.
And lo and behold, for months the UK Foreign Office and French Ministère de l’Europe et des Affaires Étrangères have been talking about a future European command structure for an army drawn from outside the EU based on experience in Ukraine and peacekeeping missions elsewhere. Globalised mercenaries in all but name.
For Starmer and the EU, it all makes such sense. They are deeply suspicious of Europeans who volunteer to serve, so a Global South army at once relieves them of any dependency on such people and their communities. The financial savings are nice too – these won’t be European-waged soldiers equipped to NATO standards. Any casualties aren’t going to unduly worry European voters, much like Ukraine’s body count hasn’t affected European voters’ support for that conflict. And should a future hypothetical political crisis in a European state “force” the EU to intervene, a non-European army is going to be a much more palatable to deploy… Trebles all round!
Interesting view.
How does this conflict look from the point of view of South America, Africa, and South East Asia?
Is it a top priority? Are they concerned that Russian armies will eventually reach Buenos Aires? Sunak tried to convince African leaders that they were involved in a ‘global war’ against tyranny. A ludicrous suggestion in itself. They ignored him.
As the author says, the EU leaders just had to get together around an antique table in a panelled room under the gaze of old masters and say something in sombre tones to look relevant, as if they were the statesmen of 1914 commanding huge empires and the vast wealth accumulated by thrifty generations. It’s like putting a penny into those Edwardian seaside animatronic amusements on Brighton pier and watching models move to simulate a haunted house or what the butler saw.
An army from elsewhere under a European command structure looks rather colonial. Askaris with British officers.
Great simile at the end of your second paragraph!
Starmer the Stiff would make a half-decent butler, too.
I mostly agree, except where you write that European weakness is inevitable. It seems highly likely, but it is a choice. Europe has the resources in people, wealth, geography, and technology, to be stronger. Compare the EU’s potential to Russia. European elites have so far chosen to be weak–and look likely to continue. But it IS a choice.
What “potential” does Europe have over Russia? There no natural resources over here, the people don’t do anything, there’s no wealth other that what the bond markets provide. Ok, there’s some nice holiday resorts.
Oh, I agree weakness is a choice however, the alternative has a rapidly closing window of opportunity. The halving of Europe’s global economic clout in just a generation and the near destruction of its advanced technology sectors will be very hard to reverse.
Don’t expect civlized behavior as the West understands it from soldiers recruited from the global South to protect Europe.
The EU statelets and other European countries might as well stop pretending to have any influence in this matter. Only after the US, Russia and Ukraine have made their decision, can they join in with the aim of trying to look important.
I wonder if Russia will also insist that Ukraine can’t join the EU … given the endless push for an EU Army by the rapacious EU Commission.
Putin just said it was OK for Ukraine to join the EU, but not NATO. Maybe he read the 2013-4 TAA, half of which is to protect the EU from Ukraine’s cheap food imports. Besides, like almost everybody, he doesn’t really understand the EU. ‘ How many divisions has the Pope?’
From what Putin has said previously, it looks like he thinks it’s just an economic bloc, a common market.
At the same time, how would the EU define Ukraine as a country if there were still Ukrainian territory under Russian occupation? Scotland, like Catalonia, was defined as a region by the EU, not a country.
Being illegally annexed, what status would the EU accord the three Ukrainian oblasts? Would Kiev have to give them up to gain EU membership? Or would the ‘colleagues’ in Brussels have to treat them as breakaway regions, invalidating their exclusion from Ukraine’s EU membership. If Brussels accepted their separation, what might that imply for Catalonia?
If Ukraine did join the EU, it would be a case of exchanging the possibility of once again having a stern master for the certainty of having a more benign one. And instead of being broken up into protectorates the country would retain, well, some sort of sovereignty.