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Hold gold as governments have 'scandalously mistreated' their currencies – Byron King

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(Kitco News) - The gold market remains trapped in consolidation below $1,850 an ounce. Still, one analyst said that the precious metal's long-term bullish setup remains firmly in place.

In a recent interview with Kitco News, Byron King, editor and recious metals expert at Agora Financial, said that he expects it's only a matter of time before gold once again becomes an essential monetary metal.

King said that with inflation rising out of control, consumers are losing faith in fiat currencies. He added that the situation can still get worse as governments continue to create money out of thin air.

"The way Western currencies have been mistreated by their own governments, mismanaged and mistreated, is scandalous," he said.

King said that the issues consumers currently face can be traced back to the 2008 financial crisis. Nearly 15 years ago, the government and the Federal Reserve flooded financial markets with money and liquidity that helped support the economy during the worst financial crisis since the Great Depression.

"We would've had a bad recession back then, but it would have cleaned out all the muck in the Augeas' stables," said King. "We would have had one hell of a miserable time for a year or two back then. Instead, the powers that be didn't want that, so they just kicked the can down the road. Well, guess what? We're at the end of the road."

With rising inflation and slower growth, the world is now once again on the brink of another recession. King said that the only solution politicians have to spend more money.

"That is how we got into this mess in the first place," He said.

But it's not just consumers who are starting to mistrust the U.S. dollar. King said that the shifting geopolitical land due to Russia's invasion of Ukraine has some sympathetic nations questioning the U.S. dollar's role as the world's reserve currency.

The U.S. government and its Western allies have weaponized the U.S. dollar against Russia and have imposed strict sanctions on the nation; however, King noted that these sanctions could also backfire and continue to impact global supply chains and drive inflation higher.

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"The thing with weapons is that they are meant to be destroyed. You shoot a bullet, launch a rocket or explode a bomb; these weapons are destroyed once they are used. When you weaponize the U.S. dollar, you risk blowing up your currency," he said. "You can argue that what Russia has done is horrible, but the U.S.'s move to weaponize its dollar can't be undone, and the world is watching to see what happens next."

King said that he expects nations, particularly friendly to Russia, to start reducing their exposure to the U.S. dollar and U.S. Treasuries and increase their gold holdings.

Despite the growing challenges, the U.S. dollar has held up exceptionally well, recently hitting a 20-year high. However, King said this is less about the strength of the U.S. economy and more about the weakness of other nations like Europe.

"The U.S. dollar remains the cleanest dirty shirt in the laundry, but it's still dirty," he said. "But what other options do investors have. Everyone is leaving the euro because Europe has no energy."

However, King said that investors are starting to realize that gold remains a solid alternative to the U.S. dollar.

"Gold's price action is a testament to its historical value," he said. "Holding some physical metal will help preserve wealth during this very tumultuous time as the world transitions away from the U.S. dollar."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.