A Return to the Gold Standard Could be Right Around the Corner
REAL VISION: JAMES TURK ON THE HISTORY AND FUTURE OF GOLD AS A GLOBAL CURRENCY
- Real Vision hosts James Turk, a pioneer of the modern gold standard, for a discussion on his thoughts on the likelihood of returning to the gold standard
- James’s views on gold and the economy were shaped largely by lessons learned from his parents and his time studying Austrian Economics
- Will gold return in some form as a global currency?
One of the modern gold pioneers, James Turk, spent years diverging from more contemporary learnings on economics in lieu of studying the Austrian school of economics. James’ views shifted from his university’s teachings of gold being a ‘barbarous relic’ to now subscribing to the idea that gold will once again circulate as a global medium of exchange and believes that J.P. Morgan himself summarized the meaning of gold best before congress in 1912 when he said that “money is gold, nothing else.”
Early in his career while working at Chase Manhattan bank, James’ perspective on gold continued to shift while learning from his colleagues who lived and worked through the great depression decades earlier – just as his parents did who largely motivated his fundamental view of gold.
Gold (XAUUSD Quarterly Chart 1930-Present)
Going back to the great depression and the London gold pool of the 1960’s, James believes that we are on the path for history to repeat itself. The collapse of the London gold pool in the late 1960s eventually led to the end of the Bretton Woods system and collapse of “the gold standard.” This caused the price of gold to rise above the pegged $35/oz which incentivized mass redemptions of gold from the US gold vaults.
James Turk believes this was driven by people realizing that the fiat money (i.e. paper money and coin) they held in their wallets did not carry the same store of value that it previously possessed when backed by physical gold. James views gold as a way to preserve your wealth over long periods of time rather than a means to increase it. This is a similar theme discussed by Rick Rule who also expresses the view that gold should be looked at as an insurance asset or hedge – not solely from the perspective of an income producing asset.
Gold’s quality of purchasing power preservation is achieved through one simple function according to James and that is because of what James calls gold’s M3 – the above ground stock of gold (i.e. total circulating supply of gold that has already been extracted from the Earth). James argues the preservation of purchasing power is achieved through the view that gold’s M3 appreciates by 1.75% per annum, which is consistent with new wealth creation and world population. Today, James believes we are still on the gold standard nonetheless: while you can’t redeem your gold for USD, you can sell USD for gold. Will markets return in some form to a gold standard? Only time will tell.
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