As we enter a golden era marked by BRICS countries ramping up their gold purchases and central banks selling US treasuries to buy gold, the landscape of reserve assets is undergoing a significant shift. Historically, gold has always been considered a proper reserve asset, and this trend is poised to return.

Central banks worldwide are reconsidering their reserve assets. The traditional reliance on US dollars is waning as physical gold regains prominence. Throughout history, gold has consistently served as a reliable store of value, and its role as a reserve asset is being reaffirmed.

In the past, the US held gold reserves that averaged 40% of the value of US treasuries outstanding. Currently, this figure has dropped to just 7%. To return to this average level, gold would need to be revalued six times its current price, reaching approximately $16,000 per ounce. If gold were to achieve the 1979-1980 peak level of 140%, it would need to be revalued nineteen times, resulting in a price of over $40,000 per ounce. Silver, historically known to move faster than gold, could potentially see even more rapid appreciation.

These projections are not forecasts but rather the potential consequences of gold's resurgence as a primary reserve asset and a return to historical norms. However, investors should not fixate on specific price targets for gold or silver. Instead, gold should be viewed as financial life insurance that has historically preserved and even enhanced investors' wealth.

The critical consideration for investors is determining what percentage of their financial assets to hold in gold. A minimum of 20% is advisable, but given the potential magnitude of the coming economic crisis, holding 50% or more in gold might be the most prudent insurance an investor can buy.

Historical Context:

Gold has been a store of value and medium of exchange for thousands of years. Its intrinsic value and limited supply make it a stable and reliable reserve asset.

Central Bank Shifts:

The trend of central banks buying gold and selling US treasuries indicates a shift towards diversifying reserves. This move is driven by concerns over the stability of fiat currencies and geopolitical uncertainties.

Potential Revaluation:

The significant gap between current gold reserves and historical averages suggests a substantial revaluation is possible. Gold reaching $16,000 or even $40,000 is conceivable if historical reserve levels are restored.

Investor Strategy:

Investors should view gold as a hedge against economic instability. Allocating a significant portion of assets to gold can protect against inflation, currency devaluation, and financial crises. The recommended allocation varies, but considering current economic conditions, a higher percentage in gold may be wise.