Nostr Web Client

Things are getting spicy nostr:note1cetdwxyfpra0e9325lr0lumuekfcssklr7unnn37ch5kvzmdmdcsqptqg5

My gut instinct tells me this would cause a gold price cascade upward. As more banks notice a risk on paper gold, they will flock to obtain physical gold in order to meet their liabilities.

Even if central banks step in to sure up the market, it will signal inflation expectations to rise for the individual investors, further pushing the physical gold price higher; which increases the spread of price making it even harder for the these ‘paper gold’ clearing banks to meet their liabilities.

Like a good old fashioned bank run.

Reply to this note

Please Login to reply.

Discussion

Logen 10mo ago

The only other thought here, is that governments could instead sell their gold reserves onto the market to try and stabilize the price. This would cause downward pressure initially.

However, allowing these Clearing Banks to buy directly from Central Banks send a negative signal to the market as gold has originally been seen as a hedge against inflation. This would only stabilize the price momentarily, but in the long-term would send signals that governments monetary systems are not secure and investors would flood to other assets like Bitcoin which has a truly fixed supply.