Financial Definition of Gold


Since the beginning of civilization, gold has been a most desired and reliable commodity. It is sought after as an accoutrement, currency, or solid protection against inflation and bankruptcy.

Ancient civilizations discovered gold. Gold immediately became valued for ornamentation and currency.

The Egyptians describe gold in hieroglyphics from 4500 years ago. Gold became very popular around the world with gold coins appearing in ancient Turkey and in ancient China. Columbus's discovery of the Americas and the gold deposits of Central and Southern America resulted in the wealth of the Spanish Empire. Inflation in Europe as currency which, was based on the gold, shot through the roof. That same gold standard continues today. Gold is the most reliable and stable global currency.

Gold has been the foundation of country monetary systems for centuries. For example, the British Gold Standard in 1914 to permitted inflationary financing of World War I. The Pound Sterling and US Dollar lost their purchasing power. It resulted in an increase of debt as people borrowed in order to spend money before loss of purchasing power occurred.

After World War II, gold was replaced by convertible currency following the Bretton Woods system. Gold standards and the direct convertibility of currencies to gold were eventually eliminated by governments. Switzerland was the last country to tie its currency to gold, until they joined the International Monetary Fund in 1999.

Today, the present world monetary system is founded on Gold held in treasuries or banks.

Gold is money, and money is gold plus credit and cash. People can erase eliminate credit, cash, but not gold. Without a domestic gold standard, citizens cannot stop governments from destabilizing domestic monetary policies with rampant overspending or ignoring asset and debt deflation.

Since the downturn of the economy in 2008 in the EU, gold prices have risen dramatically. Central banks depend on gold reserves to secure domestic fiscal policy.

Precious metals have been the best performing asset in recent years with gold and silver outperforming most equities. Gold is expensive because of:

-Gold’s historic role as money

-The declining supply of gold

-Industrial demand for gold

-Increasing investment demands for gold

Continuing inflation together with global monetary and fiscal reflation, will affect the future value of domestic currencies. This will all eventually point to higher gold prices.

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