from RT:
Pricing power in a market long dominated by Western institutional money is moving East and the implications are profound
The gold price has risen to a series of new all-time highs of late, a development that has received only cursory attention in the mainstream financial media. But as is the case with so much else these days, there is much more going on than meets the eye. In fact, the rise in the dollar price of gold is almost the least interesting aspect to this story.
TRUTH LIVES on at https://sgtreport.tv/
For thousands of years, gold was the ultimate store of value and was synonymous with the concept of ‘money’. Trade was often settled either in gold itself or in bank notes backed by gold and directly exchangeable for it. Currencies backed by nothing but government decree – called ‘fiat’ currencies – have tended to eventually fail.
However, in 1971, gold found itself cast out of this ancient role when the US unilaterally suspended dollar convertibility into gold as enshrined in the Bretton Woods agreement that established the framework for the post-war economy. Shortly thereafter, in an act that medieval alchemists only dreamed of, gold was created out of thin air in the form of futures contracts, meaning bullion could be bought and sold without any metal changing hands – or even existing.
Besides the obvious ramification of all of this – the removal of gold backing to the dollar and thus implicitly to nearly all currencies – there are two important features of how the gold market has subsequently functioned: first, gold has essentially been reduced to trading like any other cyclical financial asset; second, the price of gold has largely been determined by Western institutional investors.
Both of these longstanding trends are now breaking down. As we will see, the importance of this development is hard to overstate. But let’s begin with a very quick examination of how gold went from being the ultimate source of value to just another ticker moving in predictable patterns in the constellation of financial instruments.
How paper replaced metal
The collapse of Bretton Woods in the late ‘60s and early ‘70s – culminating in the gold window being shut in 1971 – was a messy period of transition, uncertainty, and instability. The dollar devalued and a fixed-rate system was negotiated and soon thereafter abandoned. But what was clear was that the US was steering the world away from gold and toward a dollar standard.
