Golden Ratio Return? The Global Monetary System is Quietly Reshaping

What the Market is Saying

Government officials often harbor deep concerns about stable monetary systems. This is no coincidence—the gold standard inherently limits government fiscal freedom. When currency must be pegged to gold, central banks cannot freely expand the money supply, and governments cannot unlimitedly overdraft. For this reason, from the 1930s to the 1970s, successive U.S. governments gradually dismantled the gold standard system.

But today, the performance of international markets signals a completely opposite message.

Four Signs Indicating the Revival of the Gold Standard

Central Bank Gold Buying Surge

The most obvious signal comes from central bank actions. In 2023, global central banks’ net gold purchases reached 1,037 tons, marking the second consecutive year of purchases exceeding 1,000 tons. The data for 2022 is even more astonishing—central banks bought 1,136 tons of gold, the highest since 1950.

Emerging market countries are driving this wave of gold buying. Central banks in China, India, Russia, Turkey, and others are sending a key signal: confidence in the long-term value of the dollar is waning. This reflects not only wariness of a single reserve currency but also a fundamental questioning of the global monetary order.

Emerging Payment Systems

The expansion of the BRICS group also confirms this trend. As of January 2024, BRICS has grown from five members (Brazil, Russia, India, China, South Africa) to ten, adding Saudi Arabia, Egypt, the UAE, Iran, and Ethiopia. Over 40 other countries have expressed interest in joining.

The group is actively exploring the creation of alternative currency mechanisms to weaken the dollar’s global dominance. India has even begun experimenting with issuing government bonds backed by gold—a clear signal that gold’s role as a store of value is making a comeback.

Expansion of Crypto Assets

Market continued interest in digital assets can also be seen as a cry for help. When investors doubt the reliability of traditional fiat currencies, they seek alternative stores of value. The rise of cryptocurrencies reflects this crisis of confidence—amidst increasing instability in the existing monetary system, people are turning to technological solutions.

Uncontrolled Global Debt

Data further fuels concern. Global debt has ballooned to $300 trillion, three times the world’s GDP. The U.S. debt problem is equally severe; much of the economic growth over the past 18 months has come from credit card borrowing rather than genuine productivity improvements. This unsustainable debt accumulation will inevitably trigger an intractable crisis.

Historical Cycles: The Power Play of Monetary Policy

To understand the current situation, we must review the historical turning points of monetary policy.

In the 1930s, President Franklin D. Roosevelt faced the Great Depression. Under the laws at the time, the U.S. Federal Reserve was required to hold enough gold to support at least 40% of circulating paper currency. The gold reserve restrictions became a bottleneck for Roosevelt’s expansion of government spending.

Roosevelt took radical measures: declaring gold nationalized, confiscating public gold holdings, and raising the official gold price from $20.67 to $35 per ounce. This move increased the gold value on the Fed’s balance sheet by 69%, artificially expanding the central bank’s lending capacity. The government thus gained room to increase the money supply and implement large-scale spending programs.

This pattern re-emerged in the 1960s. To support the Vietnam War and the “Great Society” programs, the Fed adopted loose monetary policy, leading to dollar devaluation. Foreign governments began converting dollars into gold, accelerating gold outflows from the U.S. Treasury.

In August 1972, President Nixon abruptly severed the last link between the dollar and gold, announcing a suspension of dollar convertibility into gold. Since then, the Fed has gained nearly unlimited printing power—without gold backing or hard constraints.

The Cost of Fiat Money

Unlimited monetary expansion does not come without costs. The consequences of abandoning the gold standard have gradually manifested: soaring debt, currency devaluation, asset bubbles, and wealth inequality.

All these issues stem from the same fundamental fact: when money is no longer backed by tangible assets, its supply is entirely controlled by governments and central banks. The beneficiaries of this system are political elites and financial elites, while ordinary people bear the greatest burden.

Historical data reveals this clearly. During the 180 years when the dollar was pegged to gold, the U.S. experienced the most stable long-term economic growth in human history, without severe inflation. Since the dollar’s detachment from gold, the average growth rate has decreased by about one-third. If the original growth trajectory had continued, the median household income in the U.S. should now be at least $40,000 higher.

Prospects for the Return of the Gold Standard

Will the gold standard become the foundation of global currencies again? It depends on a fundamental variable: when fiat systems lose credibility due to excessive expansion, are governments willing to accept the discipline that a gold standard would impose?

Financial analyst Jim Rickards offers a framework for thinking. If, due to excessive money printing, competition from cryptocurrencies, high levels of dollar debt, new financial crises, wars, or natural disasters, public confidence in fiat currencies collapses, central bank governors may be forced—rather than voluntarily— to return to a stable monetary system. In such a scenario, gold would become the only option to restore the global monetary order.

Rickards’ calculations suggest that if the world shifts to a gold-backed currency system, the price of gold would need to stabilize around approximately $27,000 per ounce to support global trade and currency flows.

The Ultimate Logic of the Market

No matter how policymakers resist, economic laws will eventually take their course. Any monetary system must earn the trust of its users. When that trust breaks down, either the old system is replaced by a new one, or it reverts to a historically proven foundation—and gold is precisely such a foundation.

The gold standard has a 5,000-year history of validation. Faced with the inherent contradictions of the current global fiat system, a return to gold-backed currencies may not be nostalgia, but an inevitable outcome of market logic.