Investors all around the world are anxious and have many questions. This question is drawing more attention: If you are considering Gold Investments, will gold continue to rise? Uncharted waters await us at $1400 an troy ounce. This question is much more important than whether or not it’s a good idea to buy gold right now. It signifies our faith in the World and the strength of our economies. …. You really need to read this article if you don’t know what I am talking. You can see gold price today for more information.
If you are a regular reader and have a deep understanding of the economics, financial markets, or how precious metals interact with each other, I’ll be glad to help. Here are some facts for those who don’t know much about this subject.
Around 5000 year ago, gold was money.
The value of paper was replaced by money by current world governments. However, it could only be used as a “note” to exchange for gold whenever the holder wanted.
These “notes” and their price were determined by the government. That rate ranged from $20 to $40 an ounce over many years. An ounce could be “swapped”, for the official price set by the government in dollars.
To be able to print and spend dollars, the governments would need to keep gold in reserve. If the national budget was about 20 billion dollars, with the official gold price at $20 an ounce the government was required to have 1 billion ounces stored in reserve. i.e… The Gold Standard.
The official move to lower the official price of gold would be the first to make the rules more flexible and allow officials more spending without having to collect any additional real money. If they had 1 billion ounces of gold in reserve (many believe long before this they stopped following these rules and stored less than they were directed to by law), and they changed to an official price from $20 to $30, they just added $10 worth of value to their supposed holdings of 1 billion ounces of gold…presto-change-o, $10 billion dollars of extra cash in their coffers.