Is the global monetary system quietly shifting to the gold standard? Four major signals from the market

Record-breaking gold purchases by multiple central banks, sustained enthusiasm for cryptocurrencies, debt levels reaching historic highs, and BRICS countries promoting de-dollarization—these phenomena point to the same direction: the world may be quietly returning to the gold standard.

**How costly is the fiat currency system?**

Since President Nixon severed the last link between the US dollar and gold in 1972, the world has entered an era of pure fiat currencies. What were the underlying reasons for this decision?

As early as the 1930s, the Roosevelt administration began loosening the constraints of the gold standard. At that time, the Federal Reserve was legally limited, with central bank gold backing only 40% of circulating paper currency. To increase the money supply during the Great Depression, the government nationalized gold and raised the gold price from $20.67 per ounce to $35, effectively increasing gold assets by 69% out of thin air. The real purpose of this move was simple: the government needed more room to print money.

By the 1960s, to support the Vietnam War and domestic programs, the Federal Reserve adopted inflationary policies, leading to a significant devaluation of the dollar. Foreign governments began exchanging dollars for gold, threatening to deplete US gold reserves. Nixon’s choice was straightforward—cut the tie entirely, allowing central banks to print money without restrictions.

What were the consequences of this decision? US economic growth slowed by about one-third. Based on the growth rate during the gold standard era, the median US household income today should be at least $40,000 higher. Fiat currency expanded government power but eroded the actual purchasing power of ordinary people.

**Four major signals indicating a shift back to the gold standard globally**

Current market signals are clear.

Central bank actions best illustrate the issue. In 2023, global central banks net purchased 1,037 tons of gold, marking the second consecutive year of purchases exceeding 1,000 tons. In 2022, a record high since 1950—1,136 tons. Behind the surge in purchases by emerging market central banks like China, India, Russia, and Turkey is growing skepticism about the long-term value of the dollar.

The rise of cryptocurrencies also reflects distrust in fiat currencies. Against the backdrop of increasingly unreliable traditional currencies, the market is accelerating its search for alternative assets.

Debt problems have spiraled out of control. Global debt has ballooned to $300 trillion, three times the global GDP. Over the past 18 months, a significant portion of US economic growth has been driven by credit card debt. This situation is unsustainable and will inevitably trigger an intractable crisis.

The actions of BRICS countries are even more symbolic. The group has expanded from the original five members to ten, with over 40 other countries expressing interest in joining. BRICS proposes establishing an alternative currency system and promoting de-dollarization of payment systems. Interestingly, India has begun experimenting with issuing government bonds backed by gold. Even Zimbabwe, a country plagued by hyperinflation, is turning to gold.

**What would a return to the gold standard bring?**

Financial analyst Jim Rickards believes that once the world shifts to a gold-pegged monetary system, the gold price needs to stabilize around $27,000 per ounce. This would imply a significant rise in gold prices.

However, obstacles are also evident. The gold standard would restrict government monetary power, which is the biggest resistance point for many countries’ leaders. Yet, as history shows, when the system itself faces a crisis, seemingly “impossible” transformations can occur.

Gold has a 5,000-year history as money. When fiat systems face collapse, it naturally becomes the most logical and credible alternative. In the face of economic laws, political resistance will eventually give way.