Otavio Costa, an economic strategist, recently highlighted that the U.S. treasuries had been displaced by gold to become the main reserve asset held by central banks around the world. Costa believes that this might precede a major economic rebalance.
Strategist Warns Gold Surpassed US Treasuries as Reserve Asset: A Dollar Rebalancing Might Follow
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Gold Defeats U.S. Treasuries as Reserve Asset: What Comes Next?
The world is experiencing an economic shift that is causing central banks to reassess their strategies and prepare for an eventual global crisis. Otavio Costa, Macro Strategist at Crescat Capital, a Colorado-based asset management firm, has highlighted a key shift in how institutions are allocating their resources between gold and U.S. treasuries.
On social media, Costa remarked that central banks had pivoted to gold as a reserve asset and that now central institutions held more value in gold than in U.S. treasuries. He noted that this is the first time this has happened since 1996, signaling a loss of trust in the ability of the U.S. to service this debt.
Furthermore, Costa believes that this trend might continue, rolling back the central bank reserves’ composition to the state they were in the 70’s, when gold composed over 50% of the value held by these institutions.
Costa stressed:
This is likely the beginning of one of the most significant global rebalancings we’ve experienced in recent history, in my view.
Costa explained that even during the civil war and the Reconstruction Era, the global debt did not exceed one-third of the gross domestic product (GDP), while today it stands at over three times that number.
“This scale of obligations leaves few adjustment mechanisms other than the currency,” Costa assesses, pointing to an upcoming, government-led dollar weakening process that could go faster and harder than expected. This would intensify the move from U.S. debt to hard assets like gold, which is already taking shape.
U.S. Senator Rand Paul noted that the growing debt is the major driver behind this exodus. “Keep that in mind, as yet another deficit-financed spending bill will be passed by the uniparty before the fiscal year ends,” he concluded.
Read more: High-Debt Nations Eye Gold Reserve Profits for Funding, Fed Note Shows
