Central Bank Gold Buying and the Remonetization of Gold
Edward Dowd points out that central banks are quietly hoarding physical gold while also pushing digital finance, tokenized assets, and blockchain-based settlement systems. He sees this as a contradiction: central banks are increasing physical gold holdings while allowing COMEX and LME to suppress gold prices. This “band-aid” approach merely diverts market attention away from deeper structural changes.
When asked how long this “illusion” can last, Dowd said gold has its own cycle. If global markets see a large wave of margin calls, gold could pull back, but he would view that as a buying opportunity. He cautioned investors not to sell their physical gold just because of short-term price declines, and not to over-leverage gold futures. Over the long term, gold prices will still move higher.
Dowd explained that although market attention is focused on digital currencies, regulators have reclassified gold as Tier 1 capital, effective in the United States in July this year. Before that, central banks had already been quietly increasing gold holdings. Physical gold can now serve as Tier 1 capital for banks, meaning banks can lend against gold. After the United States left the gold standard in the 1970s, gold was treated as a commodity; now gold is being remonetized. The question is: why?
Dowd mentioned that there has been talk about auditing the gold reserves at Fort Knox, but no action has actually materialized. He personally has a thesis: if an audit really happened, it would prove that Fort Knox holds more gold than the public knows, not less, as conspiracy theories claim.
The discussion also noted that Texas has made gold and silver legal tender, which was seen as a rather interesting signal.
Tokenized Assets and the Role of XRP
In the distributed ledger technology space, XRP is considered a project worth watching. Although mainstream news and economists rarely discuss XRP, it may play a key role in cross-border settlement infrastructure. The question was raised: is there some kind of strategic plan to connect hard assets like gold to these digital networks?
Dowd responded that there is a lot of talk about tokenization in the market, and some people are trying to tokenize gold and other assets. Technologies such as smart contracts are worth watching. XRP has long been called the “banker’s cryptocurrency,” and some skepticism is warranted, but the trend toward “tokenizing everything” is real. Whether tokenization is good or bad is debatable, but the gold market has already begun experimenting with tokenization and smart contracts.
Dowd shared discussions with people trying to bring gold tokenization to market. They said many people are reluctant to move forward because they like the existing way of doing business. Tokenization removes many middlemen, and the middlemen are not happy about being cut out. So it is a slow process that will not happen overnight, but it has begun.
Someone compared this process to the internet bubble: first heavy investment and hype, then regulators step in after participants have positioned themselves, and finally the technology is used to solve the problems of that time.
Internet Bubble, AI Bubble, and the Crypto Market
Dowd has a similar view of the internet bubble: heavy investment, hype, and excitement drove the market, and many investments eventually went to zero, but that overinvestment created the boom for internet 2.0 companies such as Facebook, Google, and Apple, because bandwidth built at high prices was later acquired at very low prices. The internet and streaming capabilities we have today are built on that earlier overinvestment.
He believes the same thing is happening in AI: a huge AI bubble, but currently lacking sufficient revenue sources to support valuations. Eventually the market will start to focus on this, because people will not keep throwing good money at bad projects. AI infrastructure will be repriced, and only then will the real AI boom arrive. It is not yet clear which companies will be the ultimate winners, but it will not be Nvidia — semiconductors are essentially commodities and will eventually be commoditized; $40,000 GPUs cannot maintain high prices forever.
On the crypto market, the discussants believe the current crypto market resembles the “Wild West,” but with a similar pattern to the internet bubble. They believe 99% of cryptocurrencies and companies will go to zero, and only a few projects with real-world use cases that solve trillion-dollar problems will stand out. They also believe the entire market may be designed to give the illusion of “fully decentralized finance, detached from the banking system,” and that this libertarian narrative may be steering people into a centralized system tied to blockchains.
They said they do not follow the news or mainstream narratives, but instead look at documents from the Bank for International Settlements (BIS) and publications from the World Bank Group. In 2022, these institutions discussed XRP and XLM as stablecoins. They are trying to connect these dots.
Risk Appetite, Cash Reserves, and Buying Opportunities
Dowd said he is not a cryptocurrency expert, but he pays attention to the asset class. In terms of correlations, when the dollar strengthens, cryptocurrencies tend to underperform; the Nasdaq also favors a weak dollar, and the Nasdaq is highly correlated with Bitcoin. Therefore, if risk appetite reverses — and he believes that reversal is coming — cryptocurrencies have room for a significant pullback. That, in turn, would create buying opportunities for the right cryptocurrencies.
He agrees with the view that 99% of tokens will go to zero and is baffled by meme coins, seeing them as a manipulated system. He said if someone recommended a meme coin to him, he is quite sure he would lose money at any holding period, so he has never bought any. Trump coin was a disaster; even the day before the inauguration it had already become one of the biggest “rug pulls” he has ever seen.
After a sharp pullback in risk assets, real gems may emerge from the wreckage. Dowd believes that some valuable projects will appear in the risk-asset correction he foresees, and professional investors will have the chance to find and invest in them, perhaps even achieving a leap in wealth.
Regarding his own holdings and risk appetite, Dowd said he is cautious on most assets, but declined to provide investment advice. He mentioned that Buffett was also too early with his bearish view — by two years — because he did not anticipate that immigration and deficit spending would inject two more years of liquidity into the economy. This is a new economic variable, and the direction has changed.
Dowd believes that cash is an asset investors do not want to hold most of the time, but sometimes you need to hold cash as “dry powder” to buy at lows. He is not advising anyone to adjust their portfolio, just reminding investors to build up a certain percentage of cash reserves, the amount being up to each individual. Because the way to create generational wealth is to buy when everyone else is selling. He expects a massive risk-off trade in the future, when headlines will be very bad, and that is exactly when “the world seems about to end” — but the world will not actually end; that is precisely the time to buy.
