Robert Zoellick, the president of the World Bank, wrote an article in The Financial Times this week, arguing that it might be time for a new international system of adjustable exchange rates that would use gold as a reference point for inflation and currency values. - from NYT Room for Debate.
It is not clear what the point World Bank president Zoellick was trying to make for gold. holdings Do we want to go back to a gold standard? This would not work and he does not seem to advocate for this type of move. The problems with a gold standard are well known. There is a supply issue and the fact that we would be moving back to a Bretton Woods fixed exchange rate system.
Does gold have a place in portfolios as an alternative store of value. The answer is clearly yes. Gold provides a real asset alternative. As measured by the behavior of many investors and central banks, there is a a demand for a fiat money alternative. Gold, as a store of value, can be what investors want to be a store of value. What is clear is that the world has had enough of fiat money especially if they cannot control it.
A boiling point is occurring with the dollar and this should be a cause for concern. Investors are looking for store of value with stability. The perception is that this occurred under the gold standard. The real price of gold relative to oil, for example, has been relatively stable.The uncertainty concerning the dollar and the size of the US money supply increases the anxiety about holding fiat dollars. Talking about gold just avoids the issues of global imbalances and the value of the dollar.
Does gold have a place in portfolios as an alternative store of value. The answer is clearly yes. Gold provides a real asset alternative. As measured by the behavior of many investors and central banks, there is a a demand for a fiat money alternative. Gold, as a store of value, can be what investors want to be a store of value. What is clear is that the world has had enough of fiat money especially if they cannot control it.
A boiling point is occurring with the dollar and this should be a cause for concern. Investors are looking for store of value with stability. The perception is that this occurred under the gold standard. The real price of gold relative to oil, for example, has been relatively stable.The uncertainty concerning the dollar and the size of the US money supply increases the anxiety about holding fiat dollars. Talking about gold just avoids the issues of global imbalances and the value of the dollar.
No comments:
Post a Comment