A return to a gold standard is very likely given the breakdown of the current monetary order and the lack of discipline by the world's governments and central banks. This page aims to inform the public about gold and the return to a gold standard.
Very simply, a gold standard is a monetary system in which currency is backed by gold. For instance, a weight of gold, say, one ounce, may be declared equal to twenty dollars. In this scenario, one dollar becomes equivalent to 1/20 of an ounce of gold, or 100 dollars becomes equal to five ounces of gold, and currency thus becomes easily convertible to gold at banks. The main argument for this system is that gold has been regarded as money for thousands of years and has maintained its value due to its rarity, beauty, durability, divisibility, and malleability. Because gold has maintained its value throughout history, a currency backed by gold retains its value and provides greater price stability than an unbacked currency, according to economists such as Peter Schiff and Jim Rickards.
Today, not only are many nations saturated with debt, but also their currencies are unbacked by anything tangible. In order to pay for their debts, many nations, including the United States, which has the global reserve currency, are printing massive amounts of money. As a result, paper currencies are depreciating in value and investors are increasingly losing confidence in them. There is now a shift among global investors toward hard assets. As central banks have become more aware of the dangers to the current monetary system of unbacked paper money, they have become net buyers of gold in recent years, thus contributing to shortages of the yellow metal.
There are also concerns among libertarians and conservatives that the current monetary system, which coddles indebted governments, encourages the expansion of government at the expense of economic liberty and the free market. Some libertarians believe that so long as central banks are able to arbitrarily print paper money out of thin air, governments will continue to spend beyond their means knowing full well they will be backstopped by the central banks, until the system is no longer able to be sustained, which puts everyone at risk of a systemic collapse.
The price decline of precious metals and commodities generally in recent years has reduced investment in mining and exploration, which will result in reduced output over the next several years. There is usually a lag between exploration and output, which means that shortages in precious metals are inevitable very soon, even if there is to be a sharp upturn in prices that spurs investment. Additionally, the reserves of gold and silver within the Earth's crust that can be mined profitably are diminishing. With the demand for silver in particular growing very fast, as emerging markets consume more of it for electronics such as cell phones and tablets, and as demand for the metal increases globally for its use in solar panels, the shortages of the white metal are likely to be particularly acute over the next few years. Investment demand for silver is also picking up, as investors look for a cheaper alternative to gold, which is regarded as out of the price range of many investors, thus also potentially contributing to silver shortages in the future.