A return to the gold standard?

'A return to Gold Standard may trigger $10,000/ounce Gold rally'

"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."

Commodity Online,

26 August, 2012

Is it a dream or a nightmare? Nobody knows, but the global superpower, US, if it returns to gold standard would see the price of gold skyrocketing to $10,000 an ounce and as a consequence would witness demand of greenback vanishing into thin air, sparking a catastrophe.

The Republicans—possibly playing an election gimmick—“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.” Reuters reported this morning.

And, “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.” the Reuters report added. "It is hard to conceive of the circumstances under which no one would want to hold any dollars," Capital Economics was quoted.

Even World Gold Council deems a move in this direction unlikely as they point out to international disagreements over the converting price and the simple fact that the annual growth in gold stock would not be in tandem with the expanding monetary base.

The coveted and sacred relationship between gold and greenback was divorced way back in 1971 under the auspices of President Richard Nixon. In 1981, President Ronald Reagan appointed a Gold Commission to see if the bond could be restored.

However the Commission reported that "restoring the gold standard does not appear to be a fruitful method for dealing with the continuing problem of inflation." Reagan heeded.

In 1973, the US government pegged the official dollar price of gold to $42.22 per ounce and subsequently allowed Americans to stock with them gold other than just jewellery.

Now, the official sector, globally, holds about 29500 tons or almost 17% of planet’s above-ground stocks, even as investors account for 19%. Jewellery gold is about 50% of total above ground stocks.