No to gold standard, Yes to gold reserves

Arguments for using gold in the monetary system range from those advocating a hard gold standard to the concept of Freegold. One would need to read through the archives of FOFOA to fully understand freegold, but I like to state it simply as allowing gold to freely float against other currencies. Gold would function as a wealth preservation asset for the wealthy and central banks, and to the extent it was needed, it could be used to balance accounts between nations. There would still be fiat money, in essence the role of money and savings are bifurcated—central banks accumulate gold instead of dollars or U.S. Treasuries. However, it is a voluntary system, in the sense that no formal laws are written requiring gold. This voluntary system would essentially function as a formal system, however, since central banks that do not have gold would have trouble maintaining the value of their currency in the absence of extremely prudent management.

You may think the concept of freegold or a free floating gold price isn't going to happen. If you believe this, however, you aren't watching the reserves of central banks. Central banks have switched from selling gold to buying gold, led by China and other emerging markets. However, even central banks that do not buy gold have seen their gold reserves increase due to the rising gold price.

Here is the euro reserves:

The price of gold has increased more than 500% from its lows in 2000, lifting it's share of reserves from 30% to more than 60% of the Eurosystem. A double in the gold price, to $3300 an ounce, would lift gold reserves to more than 80% of assets (holding foreign currency steady).

Gold is well on its way to balancing the balance sheets of central banks. The Federal Reserve and other central bankers are expanding their balance sheets to prop up their banking systems, which means gold needs to rise higher to balance the books. The trend is obvious though, to any who are watching. Gold will balance the books of the central banks, and gold will replace foreign currency holdings, particularly the U.S. dollar. The dollar as reserve currency is coming to an end; gold as reserve asset is coming into being.

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