Gold investments – An alternative monetary asset Posted by James Randolph on November 11, 2010
November 11, 2010 – The G20 summit is underway and global financial leaders will be weighing the surge in gold investments against the precarious state of the global monetary system. The issues they face are monumental. Steps being taken to revive western economies threaten to swamp Asia with capital, igniting inflation and creating asset bubbles. Reaction by Asian nations threatens to erupt into a global currency war.
Asian markets are experiencing strong growth and basic economics dictates that capital will flow from slower economies to faster ones, regardless of stimulus measures taken to get domestic economies moving. But the Asian financial crisis of 1997-1998 showed us how little it takes to topple the market. The selloff of currencies that snowballed into that market collapse was triggered by Japan’s statement that it was considering adjusting the yen – even though the action was never taken.
Because fiat currencies are easily manipulated by the issuing governments the existing global currency exchange is unlikely to ever stabilize. Robert Zoellick, President of the World Bank, has proposed redefining the monetary system to include gold as a means of moderating uncertainties. He is not suggesting that currencies return to the gold standard, but rather that gold be treated as a currency itself, a standard against which other currencies could be weighed.
The idea is quite familiar in today’s world of gold investing. Over the past several years the growth of gold investments has steadily reshaped the nature of gold from a raw commodity to what Zoellick labels “an alternative monetary asset.”
No one expects the growing pains of globalization to be over any time soon. There are many more years of uncertainty and instability to come before global equilibrium and universal growth are attained. Until then gold investing will continue to provide protection against a failing global monetary system.
Senior Staff Writer – Certified Gold Exchange