The End of the Dollar and Rise of Gold

How the world will look like in a gold-backed monetary system?

James Rickards is the director of the National Intelligence and a respected figurehead in the capital markets of Wall Street. In 2009, he studied a simulation of the economy with the help of the John Hopkins Applied Physics Laboratory and discovered a startling result: the U.S. market is very much susceptible to the actions of other countries. True enough, right after his simulation program at John Hopkins, the People's Bank of China pushed for a change of the dollar as the basic unit of international trade. In addition to that, China became the third largest gold consumer in the world, which led many traders all over the world to move a portion of their investments to the country.

Did China predict what James Rickards have found out in his simulation? Is the world going to return to the gold standard?

According to Steve Forbes, this scenario is not entirely impossible. Forbes said that the return to the gold standard isn’t only a realistic option, but the current circumstances in the world economy will need it. Research desk head Adrian Ash of BullionVault said the same thing on the 100th year anniversary of the end of the gold standard. According to current circumstances, the global monetary system is at risk of collapsing once more.

The U.S. market may be experiencing a strong economic data in recent months but experts view this as something temporary. In an article by the New York Times, it was stated that the economy is still very weak due to deficits of some sectors including Housing, State and local governments, Durable goods consumption, Business equipment investment, and the Federal government.

If currencies do end, here's how it will look like: Currently, gold’s price fluctuates at around $1,270 - $1,300. However, in a gold standard, the non-deflationary price of the precious yellow metal will be at around $7,000 - $10,000 per ounce. This may sound ridiculous at first, but according Rickards, it is the only way the world can afford to go back to the gold standard. The world has a limited amount of gold so its prices will be tremendously high.

Currencies may end but gold will never lose its value. If the world suddenly goes back to the world standard, gold investors of today will be happy that they have diversified their portfolios with the precious yellow metal.

We would solicit the comments of the readers to know what is their take on the subject.