{"id":33370,"date":"2012-11-07T21:45:24","date_gmt":"2012-11-08T02:45:24","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/11\/the-secret-return-to-the-gold-standard\/"},"modified":"2012-11-07T21:45:24","modified_gmt":"2012-11-08T02:45:24","slug":"the-secret-return-to-the-gold-standard","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/11\/07\/the-secret-return-to-the-gold-standard\/","title":{"rendered":"The Secret Return to the Gold Standard"},"content":{"rendered":"

By MoneyMorning.com.au<\/a><\/strong><\/p>\n

Although it happened more than 40 years ago, many Americans still rue the day back in 1971 when U.S. President Richard M. Nixon effectively took this country off the so-called \u2018gold standard<\/strong>\u2019.<\/p>\n

Under a true gold standard<\/a>, paper notes are \u2018convertible\u2019 into pre-determined, fixed quantities of the \u2018yellow metal\u2019.<\/p>\n

What actually happened back in 1971 was that President Nixon – facing huge budget and trade deficits, and a plunging dollar – enacted a series of economic moves, including the unilateral cancellation of the direct convertibility of the U.S. dollar into gold.<\/p>\n

<\/span><\/p>\n

By slamming the \u2018gold window\u2019 shut, Nixon also brought down the curtain on the existing Bretton Woods system<\/a> of global financial exchange.<\/p>\n

The fallout was immediate, creating a situation that financial historians still refer to as the \u2018Nixon Shock\u2019.<\/p>\n

Proponents of the gold standard<\/a> say the real damage is still being wrought: That decision four decades ago led directly to the uncertainty, volatility and irresponsibility that we see in the US economy and global financial markets today.<\/p>\n

Whether you agree or not is a topic for another time.<\/p>\n

\u00a0Central Banks Buying Gold Again<\/strong><\/h2>\n

But what I’m here to tell you today is that the world’s central banks have quietly – almost secretly – returned the world to a new version of the gold standard<\/a>.<\/p>\n

Back in 2010, the world’s central banks became net buyers of gold<\/a> for the first time since 1988. Buying ramped last year and net purchases exceeded 455 metric tons (tonnes). That was the largest net purchase since 1964.<\/p>\n

But the world’s central bankers will handily eclipse the 2011 totals here in 2012: They will purchase a projected 493 metric tons this year as they expand reserves to diversify away from the U.S. dollar and protect their countries’ economies against inflation<\/a>, Thomson Reuters GFMS said.<\/p>\n

And GFMS said you can expect central banks \u2018to remain a significant gold buyer for some time to come.\u2019<\/p>\n

Real Asset Returns Editor Peter Krauth told me he completely agrees with that assessment.<\/p>\n

As Peter explained: \u2018You can see their thinking, Bill … you can see them saying: \u201cWe have enough of all these fiat currencies in our bank reserves – now we want something that’s going to counter those holdings, that’s a valuable asset and that has all the right fundamentals in place.\u201d And that asset is gold.\u2019<\/p>\n

We’re seeing the results of this \u2018new gold standard<\/a>\u2019 in the marketplace…<\/p>\n

For instance, reports surfaced that central banks in Brazil and Turkey boosted their holdings.<\/p>\n

Turkey purchased 6.8 tons in September, and Brazil added 1.7 tons – its first purchase in nearly four years.<\/p>\n

The countries that are most-aggressively adding to their yellow-metal reserves include South Korea, The Philippines, Kazakhstan, Russia, Mexico, Turkey, Argentina and the Ukraine.<\/p>\n

Gold has outperformed virtually all of the world’s top stock markets so far in 2012, according to a report by the World Gold Council.<\/p>\n

And here’s a key point: Central bankers aren’t day-traders. So when they make a move like this, there’s generally a long-term time view.<\/p>\n

\u2018All the fundamentals are in place for this to continue,\u2019 Peter told me. \u2018These guys tend to have a long time frame in mind. So when you see a shift like this, it’s a big deal. And the chances are that this could last for a very long time.\u2019<\/p>\n

William Patalon<\/strong><\/p>\n

Contributing Editor, Money Morning<\/strong><\/p>\n

Publisher\u2019s Note: <\/em>This is an edited version of an article that originally appeared in Money Morning (USA)<\/em><\/a><\/p>\n

From the Archives\u2026<\/em><\/strong><\/p>\n

More Bad News for the Asian Century<\/a><\/p>\n

2-11-2012 \u2013 Kris Sayce <\/strong><\/p>\n

Is the Asian Century Already Kaput?<\/a><\/p>\n

1-11-2012 \u2013 Kris Sayce<\/p>\n

Has the Australian Dollar\u2019s Luck Just Run Out?<\/a><\/p>\n

31-10-2012 \u2013 Murray Dawes<\/p>\n

How the Aussie Dollar is Caught Up in Big Bankers\u2019 Games<\/a><\/p>\n

30-10-2012 \u2013 Callum Newman<\/p>\n

Does Excessive Government Spending Make You the World\u2019s Best Treasurer?<\/a><\/p>\n

29-10-2012 \u2013 Kris Sayce<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nThe Secret Return to the Gold Standard <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Although it happened more than 40 years ago, many Americans still rue the day back in 1971 when U.S. President Richard M. Nixon effectively took this country off the so-called \u2018gold standard\u2019. Under a true gold standard, paper notes are \u2018convertible\u2019 into pre-determined, fixed quantities of the \u2018yellow metal\u2019. What actually happened back … <\/p>\n

Continue reading “The Secret Return to the Gold Standard”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-33370","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/33370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=33370"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/33370\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=33370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=33370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=33370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}