The recent surge in gold prices is ushering in a new world order and may mark the beginning of a new era of conflict and insecurity.
The new world order, given by the explosion of the price of gold. The warning sent by economists
The new world order is given by the recent explosion in the price of gold. Governments and central banks have long regarded gold as a possible source of monetary stability and economic security.
This perception persists today, according to Harold James, professor of history and international affairs at Princeton University, in an article published by Project Syndicate.
Gold has become relevant again within the international monetary system. More than 50 years ago, US President Richard Nixon “closed the gold window”, marking the end of the obsession with precious metals. Thus began a new era of fiat currencies.
However, fiat currencies are currently facing challenges from taxation and new technologies, and the price of gold has reached all-time highs.
Proponents of investing in gold argue, of course, that this metal remains an ideal investment for long-term value preservation. However, it is a mistake to think that gold is the only stable one, notes the professor.
The fall in the price of gold had brought stability
On the contrary, the price of gold reflects a curve of unrest, and significant increases indicate a search for safety in a world where other values are threatened.
In the 1990s, the price of gold fell dramatically with the end of the Cold War, which brought a new atmosphere of peace and stability.
However, the price of gold experienced a significant increase after the financial crisis of 2008 and amid the outbreak of the COVID-19 pandemic, and this trend has continued this year.
China, Russia and Turkey are massive buyers of the yellow metal
Much of the increase in demand for gold comes from central banks. For example, China, which had relatively modest gold reserves of around 395 tonnes in 2000, now holds 2,260 tonnes. It is remarkable that China substantially increased its gold stock between 2009 and 2015, periods that coincided with an increase in skepticism about globalization around the world.
Russia and Turkey also began to accumulate massive gold reserves after 2015, and the same trend is evident more recently in the European Union, where countries such as the Czech Republic and Poland have increased their gold reserves.
The search for “gilded” stability is therefore a reaction to a changing world, reflecting a growing confidence in the formation of a new political order. A century ago, as the world returned to the gold standard after the First World War, John Maynard Keynes described gold as a “barbaric relic” because it was the currency of the conflict.
The professor argues that when political stability returns, the price of gold will fall. Meanwhile, governments and central banks that have invested in gold will have secured protection in an uncertain world.
