Gold is probably the only metal that has caused war conflicts. Its limited supply and untapped stocks make it a stabilizing tool in times of recession. Therefore it was gold, that became the basis for the creation of the Gold Standard, where the state currency consisted of either physical coins and / or such banknotes, which the issuer was obliged to repay their value in gold.
History of the old gold standard
The advantage of applying the gold standard was long-term price stability, eliminating the possibility of hyperinflation and a fixed exchange rate. On this basis, after the end of World War II, the Bretton Woods monetary system was established, the essence of which was to peg the US dollar to gold and all other currencies subsequently pegged to the dollar.
Leaving Bretton Woods
However, as this was due to inequalities in the development of national economies as well as the increased issuance of US banknotes against the still same size of the real gold reserves, the system disintegrated in the late 1960s. But it wasn’t until 1971 that US President Nixon decided to abandon this “Golden Anchor” for good. In the same year, the Smithonia Agreement was signed, fixing the exchange rates of selected European currencies against the dollar. However, continued inflation in the US economy led to the collapse of this agreement, which collapsed the entire system in 1973.
Economic crisis 2008
It was only after the economic crisis of 2007-2008 that the world powers began to revive the gold markets more actively again, thus generating new gold reserves. The US, Russia and China have activated a “race” in the supply of this commodity. While the US is currently declaring gold reserves in excess of eight thousand tons, Russia is talking about lower reserves. It is realistic for Americans to assume that they are “inflating” their reserves externally, while Russia and China are again fogging up and underestimating them externally.
Massive gold acquisitions
In any case, there are currently massive gold acquisitions in the US due to the expected fall of the US dollar this year, by up to 50%. Its value will no longer be saved by the interventions of Fed itself. We should not be surprised at all by the possible scenario of the so-called nationalization of gold held by individuals. After all, ordinary people have been diversifying their modest portfolios into gold for decades.
However, the future belongs to digitization. Therefore, it is realistic to assume that if the world powers fill their gold reserves to the highest possible level, the new national digital currencies, which are already in preparation, could be linked to gold, thus officially establishing the new Digital Gold Standard.