Gold’s $24 jump today is coming on the heels of a market losing direction and a broader commodities complex trying to bottom. Behind the scenes are confused hedge fund managers and Fed watchers trying to think of what could possibly spur Janet Yellen to raise interest rates.
The feeling of uncertainty everywhere is pervasive, especially with continued and increasing belligerency between Russia and the United States, now on the Syrian question. Uncertainty is when gold traditionally thrives.
Behind the scenes of all this, it is becoming more and more apparent that the public is starting to catch on to the advantages of sound banking and sound money, particularly gold-backed money, and actually using it. It began with Bitcoin, which is of course not gold-backed at all, but did show a global desire for money independent of government or central bank control.
Peter Schiff, the notorious gold bug who predicted the housing bubble in 2006 and successfully shorted it, was the first to go to market with sound banking. Schiff opened his Europac Bank a few years ago, a 100% reserve bank that does not engage in any deposit lending and is therefore inherently free of systemic risk. If the bank were to go bankrupt for whatever reason, depositors would be guaranteed their deposits back not by an insurance agency, but from the bank itself.
That trend continued with the founding a BitGold, a company that serves as a kind of Paypal for its customers but exchanges gold between them instead of currency. Each account is essentially a gold-backed bank account that fluctuates in dollar value with the fluctuation of the gold price. People can now pay people in gold through the transfer of gold titles through BitGold. This essentially is a gold standard without any artificial parity between gold and the dollar.
Finally, earlier this week, the United Precious Metals Association made it possible for any American to pay any bill, including taxes, in gold dollars. Funds are deposited with the bank and converted to gold dollars through legal tender gold and silver coins. These coins can then be used in making electronic payments through an American Express (NYSE:AXP) card. Once the money leaves the American Express card, dollar value in gold weight is subtracted from a checking account.
People can essentially pay for anything in gold.
These are the first three services of this kind to crop up recently, and the more that come into existence demonstrates that more and more people are becoming interested in using sound money.
The higher gold goes relative to the dollar, the more people will be interested in taking advantage of these services, which could produce a positive feedback loop in the gold price.
Disclosure: At the time of writing, the author was long gold and gold stocks.