Investors across the globe are plagued by nervousness. The most popular question in the world is “Will Gold Keep Rising?” We are still in unfamiliar waters at $1400 an ounce. This question is far more important than whether this is a good opportunity to purchase gold. It speaks volumes about the faith and lack of faith in the world’s economy. …. Don’t stop reading if this is a foreign concept to you. You can see gold price today for more information.
For those who are regular readers and have a solid understanding of the economy, financial market, and the interplay between precious metals, please bear with us for a while. A few facts are important if you are unfamiliar with this area.
In the past, gold was considered to be money for approximately 5000years.
When the current world governments replaced paper with money, the value of the note was accepted only as a “note”, which could be exchanged for any amount of gold the holder desired.
These “notes”, also known as gold, were created by the government. It was $20-$40 an ounce for many decades. This government-set “official” price for gold was set at $11 per ounce.
This ratio was necessary for governments to hold gold in reserve compared to the amount they could print or spend. If the country had a budget of 20 billion dollars with a gold price of $20 an ounce, it was expected that the government would have 1,000,000 ounces of gold stored in reserve. i.e… The Gold Standard.
The official action to loosen rules and allow officials spend more without collecting more real money would be to modify the official gold price. 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.