(Reuters) – U.S. Republicans have all but guaranteed the backing of the “gold vote” this November by raising an idea that even the most bullish mainstream bullion boosters believe is unrealistic – a return to the gold standard.
Gold prices would likely surge to $10,000 an ounce, the greenback’s credibility would vanish and global superpowers would risk a new trade war if Republicans were to restore the link between the U.S. dollar and gold that was severed 40 years ago.
But that isn’t stopping Republicans from considering the idea, who will call for a commission to look at restoring a fixed value for the dollar, according to a draft of the party platform to be adopted at the Republican National Convention that begins on Monday in Tampa, Florida.
Gold has returned to the political discourse recently with the growing prominence of politicians like Ron Paul, the congressman from Texas who has said that he decided to enter politics on the day that President Richard Nixon shut the “gold window” in 1971, and with the Tea Party, which helped Utah pass a law last year to make gold legal tender.
But their support won’t change the practical hurdles that would face such a wrenching shift in the currency system, one likely to have catastrophic effects on trade and growth.
To back the U.S. monetary based currently at around $2.56 trillion by the 262 million ounces of gold held by the United States government means bullion prices would soar as high as $10,000 an ounce, Capital Economics strategists said.
A sudden appreciation of the dollar’s value would crush the greenback’s credibility as the world’s reserve currency and severely undermine the international trade balance.
“It is hard to conceive of the circumstances under which no one would want to hold any dollars,” they said.
The World Gold Council, a trade group funded by gold mining companies to promote the many uses of bullion, including by investors, deems such a move “unlikely,” citing international disagreement over the converting price and the fact that annual growth in gold stock may not match the monetary base.
Even the Gold Anti-Trust Action Committee (GATA), a group dedicated to exposing what its founders say is a conspiracy by Wall Street banks, the Federal Reserve and others to depress the price of gold and silver, doesn’t see it happening.
At best they’re hoping that the RNC will provoke an audit of U.S. holdings, proving GATA’S claim of a conspiracy.
Reuters has the full article
