by Eric Hommelberg
Dec 21, 2004
 

[UNDER CONSTRUCTION, ONLY PREVIEW AVAILABLE]

Since 1971 no currency with any kind of Gold backing does exist so many analysts do argue that Gold hasn’t  any monetary status anymore. Well, nothing could be further from the truth. In 1971 president Nixon closed the Gold window. Critics of Gold  back then argued that Gold had lost its monetary use and therefore would collapse below  35 US$ / ounce. They assumed that the paper dollar gave value to Gold, not the other way around, they did not know that Gold was money. So what happened ? Instead of falling below $35 it took off  skyrocketing all the way up to its all time high of $850 US$ / ounce. Why ? Because investors lost their confidence in the US$. So where to go with your money when you lose your confidence in the world’s reserve currency ? Well, there is only one reliable alternative to the world’s reserve currency and that is Gold. It’s that simple, Alan Greenspan says : “Gold still represents the ultimate form of payment in the world.” When confidence in the world’s reserve currency is high there is no need to hold Gold and vice versa. Therefore Gold holds a tight inverse correlation to the dollar and is called the anti-dollar (see chapter I). The financial authorities these days admit that Gold still remains an important monetary asset.

"Gold still represents the ultimate form of payment in the world." - Alan Greenspan, Testimony before US House Banking Committee, May 1999.

"Gold will remain an important element of global monetary reserves." - Statement by the European Central Bank, September 1999.

Some CB’s who want to diversify from their dollars are accumulating Gold. Recent examples are the CB’s of China, Russia and Argentina.

Furthermore some countries are investigating the possibility of launching the Gold Dinar which if  they succeed in doing so will strengthen Gold’s monetary role only further.
 

- END -