Gold prices increased a whopping 12% during the third quarter but have since stalled out. The rise is attributed to anticipation of the Fed’s easing of monetary policy.
But the markets may be signaling some type of shift in the current monetary system.
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No one seems to have a clear vision of where gold prices could go from here. Some say the cooling of Chinese imports coupled with weak demand indicate that the gold market is cooling. Others say the festival season in India will strengthen it.
A paper being written by two International Monetary Fund (IMF) economists proposes legislating away bank-created money and speculates on the effect that would have on gold and precious metals prices.
Based on historical cycles of monetary systems lasting anywhere from 30 to 50 years, it could be time for the current system to change.
Gold was used as currency from the Civil War to World War I; a period of 46 years. Paper notes were tied to gold through a fixed rate of exchange from the creation of the Federal Reserve system in 1913 until the end of World War II; a period of 31 years.
The Bretton Woods system lasted 27 years and tied international currencies to the dollar through exchange rates. The dollar was backed by gold.
The current system began in 1971 when President Nixon allowed exchange rates to float, releasing the dollar from the gold standard. That was 41 years ago.
Current fiscal challenges may be ending the current monetary system. People are already losing confidence in the dollar as a result of the inflation of supply through easy monetary policy.
The prediction is that the stock markets will drop anywhere from 30% to 50%, paper money will lose its value, and gold and precious metals will go through the roof.