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Perhaps a stupid question from a non-economics laymen: If people are holding 'paper' gold that isn't backed by physical gold, then doesn't that mean that gold
by DoingIsLearning 4y ago
Perhaps a stupid question from a non-economics laymen:
If people are holding 'paper' gold that isn't backed by physical gold, then doesn't that mean that gold as a product is more scarce than the market demand? Wouldn't it mean that by increase the volume of 'paper' gold assets we are artificially pricing gold incorrectly?
- jrumbut 4y agoBut the market is for paper gold, so the price is for paper gold. Realistically, if you want some actual gold a lot of that price is going to be about delivery, storage, verification, etc, etc. The paper gold probably helps divert people who just want to bet on the price of gold away from the people who actually gold to do work (though inevitably the two groups will affect the price the other pays).
- homeland221 4y agoBingo! We are artificially pricing gold incorrectly! USA has very little gold compare to others like Russia and China. Nixon realized this in the 70s and then we have fiat dollars. Most people don't know the price of gold other than what is being advertised on the market which is based on paper gold mostly. Having gold as valuable can undermine USA petroldollar dominance and bad for America in general as gold commodity USA has very little to influence worldwide order.