There hasn’t been a new formalized global monetary agreement since at least 1976…
That is, until this past July when President Donald Trump signed the GENIUS Act into law.
If you know a little bit about the history of these kinds of agreements, then I don’t need to tell you this new arrangement is unusual.
Take the Bretton Woods agreement:
Bretton Woods, New Hampshire is home to the state’s largest ski resort. But even today, it’s much better known as the site of the 1944 Bretton Woods agreement, which formalized the U.S. dollar as the center of global trade, and upheld gold convertibility for dollars.
The agreement unofficially lasted until 1971 when President Richard Nixon “temporarily” closed the gold window, and officially ended during the much lesser known 1976 Jamaica accords. The Jamaica agreement basically just said what everyone already knew since 1971: fixed dollar-gold redemption was over.
If you were around back in the 1970s, the end of this gold agreement meant that if foreigners wanted to exchange their US dollars for gold or anything else, they’d have to go buy it in the open market. Prices soared for nearly every hard asset, from oil to natgas, sugar – and of course gold and silver.
Of course, the Bretton Woods and Jamaica agreements involved monetary authorities like the IMF, heads of central banks from across the world, with every interested party negotiating for their own interests.
Both agreements were the result of a requirement for new rules based on the needs and realities of the economic and financial system of the time – necessity being the mother of invention.
Remember that Trump ran partly on a promise to center the United States as the most crypto-friendly and forward country on earth.
The GENIUS Act is downstream of a need for some kind of robust regulatory framework for crypto assets. Previous administrations either ignored crypto entirely or in the case of Joe Biden, were outwardly hostile to crypto.
Again: the world and the US in particular needed this kind of framework. Instead of a global meeting at some cushy resort, the U.S. Congress and Trump just made up new rules themselves.
These rules do a few important things – and I believe the bottom line for us as gold investors is that we’ll see a strong link between crypto and gold – with the full legal blessing of the Federal Government.
In simple terms, the Genius Act streamlines the convertibility of dollars, U.S. Treasurys, and other traditional financial assets into and out of crypto vehicles.
Notably, Tether Gold stands to benefit from this new law. As I’ve written many times, Tether has been buying upwards of two tonnes of gold PER WEEK – in service of backstopping both its Tether Gold stablecoin AND its general operations.
Tether is also a majority owner of one of my favorite gold royalty stocks…
This new law incentivizes global investors to put money into U.S. centered crypto exchanges. No other major country has formalized crypto exchanges like the U.S. It’s now becoming increasingly easy to move gold from a U.S. Treasury to bitcoin, to a gold-backed stable coin to an ETF and back again – all with minimal or zero transaction fees.
Tether gold, for instance, charges no expense ratio or management fees to holders. And you can redeem your Tether gold shares for actual physical gold (for a fee.)
We truly are looking at what I believe is a new global monetary order – and it’s already making gold look very attractive as a pressure valve for crypto, the U.S. dollar and the Treasury market. The main critique of gold forever is that it’s difficult to transact in. Tether gold solves that problem.
But it’s just the beginning. We’re going to see massive changes downstream of this law – most of which will be very bullish for our gold positions.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio
P.S. This new law and set of rules is already picking winners and losers. I put together a full dossier on which gold stocks stand to benefit the most, and I just released it this past Wednesday.
You can read my full write-up on what the GENIUS Act means for specific gold stocks here.