Wednesday, November 10, 2010

Zoellick Refines Comments on Gold Standard

Speaking at a conference co-organised by the Financial Times, World Bank and Singapore government on infrastructure spending, World Bank president Robert Zoellick said that the soaring price of gold reflects international unease about the strength of large developed economies that must be taken seriously by the Group of 20.

He called gold the “elephant in the room” that was being dangerously ignored by policymakers in the debate over how to correct global trade and fiscal imbalances. Thus, appearing to use gold as an indicator of the current problems with paper currencies of the leading industrialized nations.

He seemed to take a step back from his call to include gold as part of any new monetary order, but he did say:
Gold is now being viewed as an alternative monetary asset. This is not the same as a gold standard. Gold has become a reference point because holders of money see weak or uncertain growth prospects in all currencies other than the renminbi, and the renminbi is not free for exchange.

So, in relative terms, gold is appealing to people who ask where should I put my money. It is a hedge against uncertainty.

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