Vincent Tie

Posted by Vincent Tie on 20 Jan 2024

Willem Middelkoop: Resurgence of Gold in the World’s Monetary System

Gold bars at a refinery

Gold is gaining prominence in the global monetary system, says Willem Middlekoop, founder of Dutch-based Commodity Discover Fund, in a January 2024 Bullion World article. Calling gold’s rise “an unobtrusive yet profound shift”, Middlelkoop believes the change in gold’s status in the monetary system is due to several recent developments.

Why is There a Resurgence of Gold?

Middlekoop believes that gold’s resurgence is due to two reasons. The first is the “diminishing trust” in the US dollar following the freezing of Russian foreign exchange reserves, most of which are denominated in dollars, with the onset of the Russian-Ukraine war.
This move by Western governments in its bid to sanction Russia to hold it “accountable for its premeditated and unprovoked invasion” has shown the world that national reserves parked in US dollars may not be as safe as once thought and can be frozen or confiscated if a country’s national interest does not fall in line with the Western world.

The United States and Western governments are planning to use Russia’s more than $300 billion foreign exchange reserves to help Ukraine’s war effort despite legal roadblocks. Should this unprecedented move be eventually taken, Ukraine could be shooting Russian-paid rockets and bullets at Russia.

While the intention of the West was to curtail Russia’s military invasion, it has unwittingly put the US dollar’s credibility on the line with the rest of the world watching if the dollar can be trusted with their national reserves.

The second reason for gold’s resurgence, according to Middlekoop, is the substantial losses incurred by bondholders worldwide with the recent interest rate hikes by the US Federal Reserve. Commercial banks, asset managers, and global central banks had previously accumulated government bonds during the years of low interest rates.

The declining value of government bonds has led some European central banks to consider offsetting balance sheet losses using their gold revaluation accounts to stave off potential government bailouts. However, Middlekoop believes that such a recourse to gold “bears consequential implications” and “could undermine confidence in national currencies, potentially triggering a shift from fiduciary currencies to gold among emerging market central banks.”

Gold Accumulation Trend is Gaining Momentum

Middlekoop observes that the gold accumulation trend is gaining momentum and is mainly driven by countries “east of Germany.”

China and Russia have notably reduced their US Treasury holdings, preferring to hold gold in reserves given Western sanctions. A significant increase in gold holdings was also observed in some European Union nations such as Hungary, Poland, and the Czech Republic. 

Middlekoop states this “shift towards gold” is also evident in emerging economies like India, Brazil, and South Africa. 

It is no coincidence that 2022 witnessed the highest central bank gold purchases since 1968.

Is a Gold Revaluation on the Horizon?

Middlekoop believes that all eyes are now on the United States in anticipation of how the world’s leading superpower response to the gold revaluation issue. The approaching US presidential election could result in progress on the gold revaluation front. Should it happen, it could send shockwaves throughout the international monetary system and mark a “pivotal stride in gold’s reemergence” globally.

As the demand for gold as a reserve asset increases, there could be a knock-on effect where commercial banks and asset managers also allocate more gold to their balance sheets and portfolios. Different precious metal analysts have also posited that the gold price will be much higher should gold be revalued, taking into account the massive quantities of fiat currencies already created.

Who is Willem Middlekoop?

Willem Middlekoop is the founder of the Dutch-based Commodity Discovery Fund, which was launched in 2008. The Fund has assets under management (AUM) reaching 160 million euros, investing in successful exploration companies that were later acquired by larger mining entities. Willem is also the author of “The Great Reset: War on Gold and the Financial Endgame.”

Gold bars at a refinery