Gold Off To A Slow Start As Central Banks Pivot Toward Digital Currencies

For the sake of comparison, in 2019 China imported around 75 tons per month, or $3.5 billion.

The country is already the world’s largest importer of the metal, so this is an important development that I believe could help the gold price stay buoyant.

Old Meets New: Will Cash Take the Digital Dive?

Besides holding gold—one of the oldest known assets, having been mined for over 5,000 years—many central banks are now on a path to introduce their own digital currencies, something our ancestors could never have conceived.

More than 60 central banks right now are believed to be exploring the idea of CBDCs, including retail tokens that would be used by citizens as well as wholesale applications for financial institutions.

But first, what is a CBDC, and what isn’t it?

Simply put, CBDCs are digital payment instruments that, like traditional fiat currency, are issued by a central bank and denominated in the national unit of account. The hope is that they will allow for safe and secure transactions and provide a transparent audit trail while also featuring a level of confidentiality.

Another benefit? No more having to break bills. Many people have shied away from using dirty paper cash during the pandemic, but in years past, Americans would lose some $62 million every year in loose change.

For now, CBDCs appear to be designed not to replace traditional cash but to supplement it. Nor do they seem to threaten the growing popularity of cryptocurrencies such as Bitcoin, whose price is far too volatile to be used as an everyday medium of exchange. Earlier this month, Federal Reserve Bank of Dallas President Robert Kaplan called Bitcoin a “store of value,” like gold, rather than a currency.

Having said that, many merchants now accept Bitcoin as payment, the most notable, perhaps, being Tesla. Visa and PayPal already let customers use cryptos to settle transactions, and last week, PayPal-owned Venmo said it will permit crypto trading. Miami mayor Francis Suarez wants to allow residents to pay their taxes in Bitcoin.

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