"While it is included in the
commodities basket it is in fact a medium of exchange and one that is
officially recognised (if not publically used as such). We see
gold as an officially recognised form of money for one primary reason:
it is widely held by most of the world’s larger central banks as a
component of reserves."
"We would go
further however, and argue that gold could be characterised as ‘good’
money as opposed to ‘bad’ money which would be represented by many
of today’s fiat currencies. In describing gold as such we refer to
Gresham’s Law – when a government overvalues one type of money and
undervalues another, the undervalued money (good) will leave the country
or disappear from circulation into hoards, while the overvalued money (bad) will flood into circulation."
t:
"In our view the ideal medium of
exchange must balance the paradox of representing value while having
little intrinsic value itself. There are very few media which can do
this. Fiat currencies physically have no use other than that which is
prescribed to them by government and accepted by the public. That fiat
currencies cost little to produce is of a secondary concern and we
believe, quite irrelevant to the primary purpose.
"Gold is neither production good nor
consumption good. Jewellery we see as a form of storage or hoarding
(the people of Portugal have all but exhausted their personal gold
stores – hoarded in the form of jewellery – having converted them to
survive the crisis). If gold did have a meaningful commercial
use we believe that it would make the metal less attractive as a medium
of exchange as the value of the metal in whatever market it was used in
could periodically interfere with its medium-of-exchange role..."
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