A few years ago, World Bank chief Robert Zoellick said in an article the Financial Times that leading economies should consider “employing gold as an international reference point of market expectations about inflation, deflation and future currency values.”
Naturally, economists and self-appointed pundits around the world called him mad, saying there is no way we can return to the old Gold Standard.
If he were really talking about a literal return to the Gold Standard, it might be fair to call him mad.
But he wasn’t.
He was simply pointing out that today’s world currencies are floating around, with no anchor or reference point.
This has been particularly true of late. Around the world, countries are sniping at one another, complaining about the strength or weakness of each other’s currencies.
These arguments are exacerbated by the fact that nobody can quite figure out how currencies should be valued relative to one another. It used to be that the U.S. Dollar was used as a reference point. But with its current weakness, the dollar is failing in that role.
With world currencies adrift, perhaps it isn’t quite so mad to point to gold as a standard by which currencies can be valued.
Will a new and formal Gold Standard be created? Almost certainly not.
But for people who buy gold, whether it happens or not is immaterial.
What is material is the sentiment of buyers and sellers.
If buyers and sellers agree that currencies lack foundation, they will feel safer buying gold.
And the more that happens, the more we can expect the price of gold to rise.
Happy days for owners of gold.
Further reading:
6 Good reasons to own gold coins or gold bars.
Storing gold – at home, in a safety deposit box, or with your dealer.