(A)Political - February 22nd

Good morning everyone,

Calm waters are not greeting the political world this week. Let’s dive in anyways!

The impact gold is having on trade relations, and internal economic growth has brought many points to bare, including an audit of Fort Knox by DOGE staff (including Elon). Mass layoffs continue to be a reigning theme in the District of Columbia. The State Department has now deemed the Mexican cartels as terrorist organizations.

• Orange Is The New Gold

• Mass Layoffs are now a theme in D.C.

• State Department Labels Mexican Cartels as “Foreign Terrorists”

• We got hundreds of emails, and we just dropped some merch after you all asked us to restock. All profits from this merch sale go towards the LA Firefighters Foundation!
  You can get it at our shop here.

Orange Is The New Gold

_{By: Jose Garcia, Economics Analyst & Intern for Atlas}

The great power competition between Beijing and Washington has extended across many sectors of the global economy. However, it has recently become a significant factor correlating with the rise in gold prices. The key point to emphasize here is the level of uncertainty and its connection to the value of gold. In the current landscape, government concerns regarding inflation, fiscal sustainability, and foreign policy toward China all influence the price of this valuable resource.

During periods of geopolitical uncertainty, gold is often purchased as a hedge against rising inflation. Since Donald Trump's successful re-election, it is reasonable to assume that tensions between China and the U.S. will escalate once again. This assumption is based on Trump's historical relationship with Xi Jinping, particularly the trade war that began in 2016, which also caused a significant rise in gold prices.

Tensions, Tariffs, and Projections

In early February 2025, Goldman Sachs reported that the potential for rising tensions between the U.S. and China was high, projecting that gold could reach $3,300 per ounce by the end of the year. This assessment was based on the Trump administration's deployment of new tariffs as part of its broader policy strategy.

This past week, both spot and futures gold prices rose by 0.8% in response to the 10% tariffs imposed on Chinese exports. Additionally, tariffs were also placed on Canada and Mexico, further heightening concerns over geopolitical uncertainty.
While there is currently no fear of an outright war between the two nations, the most realistic scenario involves the use of tariff policies and the potential for low-level confrontations in the South China Sea. Gold is considered a safe haven in both cases, as its value remains more stable than fiat currency during inflationary periods.

Indicators Behind Gold Purchases

Two main indicators explain why countries might choose to buy gold rather than hold U.S.
government bonds or dollar reserves. First, Washington has the power to restrict nations from the SWIFT network to enforce sanctions. Buying gold helps countries mitigate the risk of being subjected to such financial restrictions. The second factor is the growing influence of the BRICS group.

With Beijing leading a de-dollarization strategy, BRICS nations aim to develop an
international system less reliant on the U.S. dollar. Encouraging member states to accumulate gold serves as a crucial step toward this goal.

BRICS Influence and Shifting Dollar Reserves

In Q4 of 2024, China was the third-largest buyer of gold reserves globally, with India ranking
second and Poland leading as the top buyer. This benefits Beijing, as India is not only a key
BRICS member but also the world's largest democracy. If New Delhi becomes more open to conducting trade in currencies other than the U.S. dollar, it would further support China's ambition to challenge the U.S.-led global financial order.

This point is reinforced by the fact that India and China are currently the two largest sellers of U.S. dollar reserves. Their recent surge in gold purchases likely correlates with this trend,
signaling an effort to shift away from reliance on Washington’s financial dominance.
Undermining U.S. economic influence has been a long-term objective of multiple China-led initiatives, and this strategy is giving Xi Jinping greater leverage on the global stage.

Fort Knox Audit Debate and Key Takeaways

Additionally, some lawmakers, including Senator Rand Paul, have urged Elon Musk to conduct an audit of Fort Knox, the site where U.S. gold reserves—valued at approximately $426.3 billion—are held. The pressure stems from Musk’s newly established DOGE agency, aimed at reducing corruption and mismanagement in Washington. Fort Knox has not undergone an official audit since the 1950s, though there is little evidence to suggest that the quantity of gold has changed since then.

James Richard, an investment banker, emphasized that an audit would primarily serve to restore confidence in the integrity of U.S. gold reserves rather than uncover any alterations in the total holdings. However, he noted that a potential finding could be the amount of gold leased to borrowers, a common practice to enhance liquidity in the banking system.
Overall, there are two key takeaways regarding gold’s current role on the international stage. First, China and India are increasing their gold purchases while reducing their U.S. dollar reserves, which aligns with Beijing’s strategy to shift the global financial order away from dependence on the dollar. Second, if Musk proceeds with a review of Fort Knox, it would likely serve to reaffirm confidence in the U.S. gold reserves rather than reveal any substantial changes in their quantity.

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