EACH DAY NOW GOLD IS MORE ESSENTIAL AS A TRADING CURRENCY. WILL IT SUPERCEDE DOLLARS ANY TIME SOON?

Why has gold become so important and valuable in our history? There are many ways that people have chosen to store value through time, and some make a lot more sense than others. Let's think about what makes a good storehouse for value: Durability - cows don't last forever and are additionally susceptible to drought, predators, hungry farmers and many other forms of abuse. Things that can be carried, or even better these days, moved electronically are best. Portable solid objects, generally metals or gems, have functioned for thousands of years in this role. Somewhere along the way, back in our prerecorded economic history, gold became something that people valued. Perhaps it was the sparkle, or one of the physical properties that attracted us, but humans began to keep gold and trade it for goods that other people produced.

It was about 1500 BC that Egypt, this very wealthy nation, began to use gold as the medium of exchange for trade. Worldwide gold coins came next.  In 1091 B.C. gold squares were legalized in China as a form of money. In 560 B.C. the first coins made purely from gold were minted in Lydia, a kingdom of Asia Minor. Great Britain issued its first gold coin in 1284 AD. The history of gold as a form of money is rich and full of stories of fallen empires, sunken ships, and gold rushes. When gold was loaned to sovereigns, by what we would today call bankers, there was a huge amount of risk, but the relationship was clear -- the king still needed gold to run the country. After a knock down drag out Presidential campaign in 1892 fought mostly over the choice between silver and gold as the backing for US currency, William Jennings Bryan lost and gold won.  In 1900 the U.S. adopted the gold standard for its currency. In the midst of the depression, Franklin Roosevelt really put the hammer down when he banned the export of gold, the holding of gold by individuals (including confiscation), and the gold linked contracts were legislatively ruled to be invalid.  The currency was still backed by gold but no one could enforce the provision.

In 1944 The Bretton Woods agreement set out to form a new standard and set par values for currencies in terms of gold and obligated member countries to convert foreign official holdings of their currencies into gold at these par values. The Bretton Woods agreement also established the International Monetary Fund and the World Bank. These two institutions would be the police for countries attempting to print more currency than their gold reserves would allow. In 1971 President Richard Nixon closed the gold window, which in effect took the U.S. dollar off the gold standard. Since that time, there has been no correlation between gold and the U.S. dollar. It is a fact no paper currency in the world has ever survived. They've all eventually become worthless. But gold has not. And while we don't think the dollar will become worthless any time soon, we do believe it will continue to depreciate as it has since coming off the gold standard in 1971. And this should indicate a continuation of the gold rally that began in 2001. Gold recently touched $1000 per Troy ounce. Is there any ceiling in the future?