Robert Zoellick, president of the World Bank, is concerned about the future of our global monetary system. Once upon a time, every dollar in the United States needed to be backed by gold and silver because these metals were said to have intrinsic value. If the world is losing faith in the U.S. dollar as a reserve currency, would it be a good move to move back to gold, the standard for much of monetary history?
There isn’t enough gold in the world to cover the money supply. After Zoellick’s remarks, the trading price of gold shot past $1,400 per ounce as traders speculated what could happen if the gold standard returns. Demand would skyrocket, supply wouldn’t change, and the price would soar. Anyone owning physical gold, which would suddenly become necessary for governments who need to hold reserves, would be able to sell at an incredibly high price.
I’m not running out to buy gold. A return to the gold standard is highly unlikely. The United Nations and the G20 have been tossing around the idea of using a basket of currencies or a new international currency to stabilize the world’s financial system, and if anything changes, that seems more likely than going back to an abandoned monetary policy.
Are you buying gold with the hope that the value will continue increasing?
Updated November 13, 2010 and originally published November 9, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.