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Stupid question.............???

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Creature_of_the
Super Contributor
If gold is regarded by many as a currency, then why are all other commodities not price per ounce of gold etc?..........Thus ignoring the dollar and other fiat currencies etc...........
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4 REPLIES 4
CHATTYCHAT
Super Contributor
The gold standard was a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold... The gold standard broke down during World War I, as major belligerents resorted to inflationary finance, and was briefly reinstated from 1925 to 1931 as the Gold Exchange Standard. ...on August 15, 1971, President Richard M. Nixon announced that the United States would no longer redeem currency for gold. This was the final step in abandoning the gold standard Read the article at http://www.econlib.org/library/Enc/GoldStandard.html
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Major
Regular Contributor
They partially do - you can see copper quoted in gold oz, and vice versa. Many mineral resource statements will also quote in gold equivalent ounces where there is a by product. I think the reason for the $ dominance is that it so utterly dominates global trade - nearly $5Tn traded daily. Nothing else comes close.
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THRESHOLD
Super Contributor
Gold lacks utility (for the most part) - so the price of gold reflects its exchange rate to the prevailing currency basket. There is no need to price in gold ounces since the aforementioned "mechanism" exists to translate value. More importantly - the dollar is the reserve currency by consensus. It is tradable - and infinitely scalable. Gold would need to be "micro-shaved" if exchanged in physical form. If, with gold, you were to deliver a promise of delivery only - then you would have a currency again. If we were to revert to the gold standard - we could see massive relative price deflation as everything would need to be "squeezed" into the available gold value. This is the flipside of the runaway gold price that the gold bugs lust for. It would be catastrophic...
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Creature_of_the
Super Contributor
Thanx for the informed replies ...Maybe we should go to a Silver standard............
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