The Gold Monetization Scheme: El Dorado Revisited

Not long ago Gold was a universal legal tender. Governments held it in forts. The bank’s kept it in a safe. It was the most precious of precious metals. And investors bought gold for safety’s sake, when markets and economies crashed and the value of paper currency was in doubt. But that was a long time ago. Gold, after all, is hardly a functional commodity. If it had any major purpose, it wouldn’t be stored in vaults around the world. But, anyway it’s traded with aplomb. As we move into an ever-tech savvy world, gold has more competition: namely the digital crypto currencies such as Ethereum, that cater to the new generation of skeptics. The crypto currency market touts itself as an alternative to the currency markets and a hedge against inflation. The digital currency values, like gold, are based on the confidence of the buyer, nothing more. Gold prices dropped 2 percent in February 2018, as the U.S. dollar strengthened and the new U.S. Federal Reserve chairman fueled views that the U.S. central bank would raise rates four times this year rather than three times as was unofficially reported in January. The Gold Monetization Scheme is a wonderful concept of monetising domestic idle gold and using it for the import substitution as well as giving a fillip to ETF’s and reduction in the CAD. The present paper is attempts to critically evaluate the GMS with reference to the ever volatile gold bullion prices and the global trade wars that have erupted after the election of Donald Trump as the US president and Mr Xi Jinping consolidating his control over the PRC.