Gold surges 14% amid de-dollarization

Central banks globally are on a gold buying spree, a strategic move to lessen dependence on the U.S dollar also known as de-dollarization. With the price of gold hovering around $2,300 and investors keeping a close eye on this precious metal's rise, Zimbabwe has recently joined the bandwagon by introducing their new gold-backed currency, the ZiG. To gain a deeper understanding of how the dollar's decline impacts gold and the reasons behind de-dollarization, CNBC Africa hosted Rufas Kamau, the Lead Market Analyst at FXPesa, for an insightful discussion from Nairobi, Kenya. Rufas pointed out that gold tends to react positively to a decline in the dollar due to geopolitical uncertainties, with investors flocking to gold as a safe haven asset. Despite the recent pullback in prices post the Israel-Iran tensions, gold has had a remarkable bullish run this year, surging by 18% to reach a peak of $2,430 per ounce, before slightly retracting to $2,332. The main reason behind this surge was the global uncertainty surrounding key geopolitical events. Rufas highlighted that central banks and investors are increasingly turning to gold as a hedge against inflation and a means to diversify their portfolios amid the ongoing de-dollarization. Countries like Russia, China, and several others have been accumulating gold reserves in response to the geopolitical shifts and to shield themselves from potential sanctions imposed by the U.S. Rufas emphasized that gold and Bitcoin are emerging as alternative assets that have demonstrated the ability to hold value over time, particularly in the face of market uncertainties and inflationary pressures. Zimbabwe's recent launch of the ZiG, a gold-backed currency, has marked a significant step towards stabilizing their economy and preserving the value of their currency. The ZiG's performance has shown a strong correlation with global gold trends, underlining the importance of solid gold backing. As Rufas pointed out, countries with gold reserves can easily accumulate more gold to support their currencies, while those without this precious metal can opt for other hard assets to maintain value. He noted that the trend of de-dollarization is likely to continue, with more countries seeking alternative trading currencies like gold and Bitcoin. Rufas also highlighted the importance of sustainable practices in managing potential gold rushes, stressing the need to strike a balance between hard assets and other financial instruments to ensure long-term economic stability. In conclusion, the global gold rush and the ongoing de-dollarization trends are reshaping the financial landscape, with gold emerging as a preferred asset for central banks and investors looking to safeguard their wealth and hedge against market uncertainties.