Issue link: http://resourceworld.uberflip.com/i/99312
S P E C U L AT I O N S L eon ard M e lma n Gold and central banks I n what may be an important stage of a historic round trip, gold appears to be making a dramatic re-entry into the world of international central banking operations. The term "round trip" is used because of the unique history of gold as money. For century after century, dating back to ancient history, gold and silver were money, with gold in the leading role. In fact, for most of those eons, right up to the early 1930s and the onset of the Great Depression, gold remained the dominant money of choice for much of the civilized, industrialized world. Then, following the onset of the Depression, much of the world abandoned gold-as-money, specifically including the great powers of Europe and the US. 32 www.resourceworld.com Renowned economists such as Lord John Maynard Keynes began referring to gold as a 'barbarous relic' and master politicians such as Franklin Delano Roosevelt decided that gold had to be decoupled from his nation's domestic monetary matters in order to expand governmental operations designed to counter the Depression's effects. From that point onward, gold entered a period of declining influence, culminating with the Nixon elimination of gold, in any form from, American currency matters in 1971. International bodies such as the International Monetary Fund (IMF) began to auction off their gold holdings in the mid 1970s and the price of gold, which had reached US $200/oz at year-end 1974, lost half its value. While a combination of international conflicts and rising inflation brought about a powerful gold rally in 1980, for the most part until 1999, gold and silver remained in bear markets accompanied by diminishing interest and continuing sales on the part of central banks. However, in that year, the historic securities bull market which began in 1982 came to a grinding halt and many countries, specifically including the US under the leadership of previous Fed Chairman Greenspan, adopted Keynesian policies of artificial stimulation and ultralow interest rates in order to prevent serious economic contraction. These policies provided an area of concern for central bankers and they drafted an agreement known as the Washington Agreement on Gold (also known as the Central Bank Gold Agreement). The DECEMBER 2012/JANUARY 2013