Central Bankers Survey Found The Dollar To Lose Reserve Currency Status

A not-so-surprising conclusion but still amazing work done by UBS and reported by the FT, who surveyed 80 Central Bankers and found that the majority of them agree on the fact that the US Dollar will lose its reserve currency status.

A few points:

  • Central Bankers and Policy Makers are the worst market forecasters and worst market timers possible, making them the best contrarian signals available.
  • It's the first time that this survey finds a majority Central Bankers and Policy Makers to be as bearish on the USD. 
  • These seem contrarian indicators are very bullish on gold — planning to increase their reserves of gold — and predicting that gold would be the best performing asset class over the next year. These same geniuses were selling gold at $200/oz 10 years ago and were not seeing any upside possible this archaic relic.
My contrarian thinking will lead to the following two conclusions:
  • Unfortunately for gold bugs (myself included), the yellow metal should be performing poorly over the next year.
  • The USD dollar should be among the best performers across any asset class.
Here are some quotes from the FT report:

The US dollar will lose its status as the global reserve currency over the next 25 years, according to a survey of central bank reserve managers who collectively control more than $8,000bn.

More than half the managers, who were polled by UBS, predicted that the dollar would be replaced by a portfolio of currencies within the next 25 years.

That marks a departure from previous years, when the central bank reserve managers have said the dollar would retain its status as the sole reserve currency.

UBS surveyed more than 80 central bank reserve managers, sovereign wealth funds and multilateral institutions with more than $8,000bn in assets at its annual seminar for sovereign institutions last week. The results were not weighted for assets under management.

The results are the latest sign of dissatisfaction with the dollar as a reserve currency, amid concerns over the US government’s inability to rein in spending and the Federal Reserve’s huge expansion of its balance sheet.
The prediction of a multipolar currency world replacing the current dollar dominance chimes with the thinking of some leading policymakers.

Robert Zoellick, president of the World Bank, last year proposed a new monetary system involving a number of major global currencies, including the dollar, euro, yen, pound and renminbi.

The system should also make use of gold, Mr Zoellick added. The results of the UBS poll also point to a growing role for bullion, with 6 per cent of reserve managers surveyed saying the biggest change in their reserves over the next decade would be the addition of more gold. In contrast to previous years, none of the managers surveyed was intending to make significant sales of gold in the next decade.
The reserve managers predicted that gold would be the best performing asset class over the next year, citing sovereign defaults as the chief risk to the global economy.
More reasons to think that the dollar is bottom — my opinion is that it's a secular bottom. Just see how much confidence the pundits have in the Central Banks ability to inflate in the face of complete failure so far:

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