The U.S. dollar was among the first to abandon the gold reserve system 40 years ago, as part of a series of economic mandates that came to be known as the "Nixon Shock". Since then, every other major world currency has done the same.
With national economies now running on the fiat capital system, in which money is conjured into existence by governmental decree, there is simply not enough of any precious metal to back up all financial transactions everywhere.
But will this stop minor forays back into a gold/silver-backed system?
Clearly not.
Updated July 2011:
1 - USA: 8965 tons
2 - Germany:3747 tons
3 - IMF: 3103 tons
4 - Italy: 2702 tons
5 - France: 2684 tons
6 - China: 1161 tons
7 - Switzerland: 1146 tons
8 - Russia: 915 tons
9 - Japan: 843 tons
10 - Netherlands: 674 tons
Quoted from a friend's point of view:
From the list, we understand that US and Europe has a stockpile of close to 25000 tons of gold while China and Japan has only 2000 tons. After spending 25 years in stockpiling gold and buying gigantic sum of goods from China and Asian countries with dollar debt notes, the elite capitalist understand that the time to cash out has arrived. |
Remember, it is not so much what the predominating trend is, or even what is legally mandated, that's important to bull markets...
As common perception starts to reevaluate gold and silver as currencies rather than commodities, everyone from market makers to amateur investors will do what they always do during times of adversity: They will diversify heavily into this once-fringe market.
New demand will drive up prices, and increasing media coverage of inflating currencies will continue to feed the market.
New production will work overtime to feed demand, sending mining and exploration stocks flying.
But with investors hoarding the metals, there will likely still never be enough available to ever back any major national currency again.
So while planning for a global economic reversal to the gold standard is at best premature and at worst, delusional, the prognosis for this market is pretty clear...
Expect gold and silver to not slow down anytime soon. Another 50%-100% growth is possible over the next 12-18 months. And expect any company involved in exploration, mining, and production to see banner years for at least 2011 and 2012.
Good investing,
Luke Burgess
Analyst, Wealth Daily
