Countries Embrace Gold as Alternative to US Dollar: Insights from Former Morgan Stanley Head
According to former Morgan Stanley executive and investment veteran Ruchir Sharma, central banks worldwide are exploring ways to work around the US dollar’s world reserve status. Sharma explained in an interview with France 24 that America’s biggest economic rivals have been trying to transact with each other without using the dollar.
He gave examples of Saudi Arabia and China trading in oil and trying to find ways to settle payments in each other’s currency instead of using the US dollar. Similarly, India is exploring the same option with the UAE, hoping to cut the dollar out as a denominator.
Sharma, who is now the chairman of Rockefeller International, also said that leading economies are diversifying their foreign exchange reserves by relying less heavily on the dollar and allocating more to gold. Over the past year, central banks from Brazil to India, China, and Turkey have been buying gold in a very big way, increasing their gold holdings at a nearly historic pace. Instead of holding foreign exchange reserves in the US dollar, they’re holding them increasingly in gold, which has caused the price of gold to surge sharply over the last few months.
Sharma believes the US may have overplayed its hand when it imposed sanctions against Russia during its conflict with Ukraine, as other countries were watching and could also face consequences for being on the wrong side of a conflict.
He points out that many commentators and policymakers believe that there is no alternative to holding the US dollar and that the Chinese currency is not fit to be held, and the Euro has its own problems. However, Sharma cautions against such complacency and arrogance, stating that the US dollar losing its reserve currency status could have serious consequences, given how reliant the US is on the dollar’s supremacy.
In summary, while central banks worldwide are looking for ways to reduce their reliance on the US dollar, Sharma highlights the potential risks associated with this shift and the importance of careful consideration before any changes are made.
Clever Robot News Desk 10th May 2023