A neighbor of China, Kygyzstan has been amassing a sizable gold reserve in relation to the size of their country. They have international reserves of about $2 billion and they have stockpiled about 16% of this reserve in gold, their goal is to build the percentage to 50%.
The country’s Central Bank Governor said “The rules of the game are changing. It doesn’t matter what currencies we have in our reserves; dollars, yuan or rubles all make us vulnerable”. The governor probably makes this assessment based on what occurred in 2015 when the country’s currency (som) fell to record lows due to the devaluation of the Russian ruble. After that, the country increased its gold reserves from 8 to 15%.
Kyrgyzstan’s largest export is gold, the country mines a large amount of gold. The governor believes it is far more prudent to maintain the mined gold in the country’s reserve instead of exporting it. The stored gold can be converted into the currency they need for trade.
This is likely to be a growing trend as the currency wars and the trade wars escalate among the countries of the world. It is the opinion of some that precious metals are real wealth and fiat dollars are just representations of precious metals. As the economies of the world’s countries move towards collapse, more pundits are moving to the conclusion that precious metals are the real wealth.
It is true that one can not eat gold or silver but it is more likely that someone would be more willing to trade for gold and silver than fiat currencies.