de facto gold standard

What is a de facto gold standard ?

De facto is an expression of the Latin language and means " by fact". Lawyers use the term de facto when they want to refer to something that is a common practice not necessarily ordained by law.

A gold standard is a law where a country pegs all financial transactions to a fixed gold price. At this point gold is considered " commodity money".

A defacto gold standard is therefore a standard based on the price of gold but not a law that trades must be carried out on this gold standard.

The current method of printing money ( paper currency ) at will by several different countries and unions is the antithesis to a gold standard.

Meanwhile people, retail traders and professional financial assets managers look to gold has a safety in gold acquisition knowing full well that a piece of paper is nothing more than a future contract with no expiry date. A dollar bought or received today buys more or less in tomorrows market. A paper currency is tradeable.


Here's an article by The Market Oracle which is called "Gold $1200 Means Defacto Resurrection of the Gold Standard".

What it says is that investors look to the US dollar as a measure of security in a world where financial security is hanging by a thread. It's a world where money lenders need to create an illusion of wealth by printing massive amounts of fiat paper currency in order to have the consumer feel rich enough to starts borrowing and spending again in order to continue the illusion of strong economies. The success of such an illusion is measured in inflation. More government paper money in the system.

With money, investors buy gold. It's the commodity of choice should the markets collapse to levels such has were witnessed in 1929.



Meanwhile gold at 1200 is a resurrection of a gold standard states the article.

" The parabolic rally in the gold market might in fact, be representing a historic flight from paper currencies of all nationalities, which are becoming increasing worthless. Replacing the paper currency system is resurrection of the Gold standard. That is to say, the proper way to value bond and stock markets, would be through the prism of gold, rather than in the host country's currency."