The Phaserl


The Current Monetary System is Breaking Down

What would it take to break the gold price out of the $1,600 to $1,700 an ounce range in which it has been trading for the past year? Another massive blast of quantitative easing from the Federal Reserve? A final breakdown of the euro? A war between Israel and Iran?

by Matthew Lynn, Market Watch:

They are all possibilities, of course. But the most likely candidate is a serious debate about a return to some form of the gold standard.

In the U.S., the Republican Party has already pledged to study restoring the link between the dollar and gold if it wins the upcoming election. In Switzerland there have been parliamentary debates about restoring the link between the Swiss franc and gold.

Central banks are already increasing their holdings of gold. Don’t be surprised if it starts to play an increasing role in the ever-more fevered attempts to fix Europe’s monetary system.

What would gold be priced at if it reclaimed its role at the center of the monetary system? There are plenty of predictions out there but the truth is no one really knows.

The interesting point is this, however. Markets are anticipatory. They are always trying to get ahead of the game. It doesn’t take an actual return to the gold standard to send the price soaring. Just the debate should be more than enough.

And that is already under way.

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