While national currencies are drowning in economic problems, the public trust in gold has been growing throughout the world. We have already written about the proposal of the Prime Minister of Malaysia to introduce an Asian currency based on gold.
But what if the US introduce it before Malaysia does?
Gold and the dollar’s future
The issue of possible return to the gold standard* system remains high on the agenda of the United States due to speculations on the dollar’s bleak prospects. JP Morgan Bank analysts believe that the dollar will lose the status of the ultimate global currency in the coming decades.
In the attempt to find a way out of this situation, many American politicians and economists turn to gold that once fostered the dollar’s rise to a leading position. After World War II, 70% of the world's gold reserves were concentrated in the United States. The provision of the precious metal strengthened the dollar and made it a global reserve currency.
The abolition of the gold standard led to dramatic consequences. Since 1970, the dollar has lost 86% of its purchasing power as a result of inflation. Within the same period of time, the purchasing power of gold has grown by 505%.
In the chart: since 1970’s, there has been a sharp decline in the purchasing power of the dollar against gold.
The presidential support
Given the circumstances, the growing number of the "golden dollar" proponents is hardly surprising; being a long-time fan of gold, President of the United States Donald Trump is one of them. Even before his election, he said: “Bringing back the gold standard would be wonderful! We used to have a very, very solid country because it was based on a gold standard.”
These were not mere words. The president has nominated Judy Shelton as a candidate for the Board of Governors of the Federal Reserve System (the Fed*), who is a well-known supporter of the gold standard.
A stable growth
The current situation on the world market convinces people that gold remains a profitable alternative to currencies and a reliable foundation for achieving Financial Security. A survey conducted by Bloomberg showed that 69% of businessmen and analysts see the potential of the gold price further growth.
James Rickards, an American economist who advises the US Department of Defense, estimated that a return to the gold standard could raise the price of the precious metal to $10,000 an ounce.
Whitney George, President of the investment fund Sprott Inc.: “We're now going from trade wars almost into currency wars. Gold is a currency, but it's nobody's obligation, so it will stand tallest when everyone else is trying to debase their currency to be competitive globally.”
On August 26, 2019, the price of gold was $1,543 per ounce.
48 years have passed since the abolition of the gold standard, and the world has come to an understanding that yellow metal remains the most reliable financial tool. Today we witness how it is gradually reaffirming its status, occupying leading positions in the economy. The top officials of the states call for currency to be backed by gold, central banks increase the procurement and ordinary people create their own gold reserves.
*The gold standard — a monetary system in which each economic unit of account (national currency) is based on a fixed quantity of gold. For example, the US twenty-dollar bill ($20) was equivalent to one ounce of gold (31,1 grams) in 1928.
*The Federal Reserve System (the Fed) — the independent agency that oversees the commercial banking system and acts as the central bank of the United States.