Daily Gold Market Report

Exploring the Gold Standard:
Potential for Price Equilibrium in Modern Economy

(USAGOLD – 3/28/2024) Gold prices are again posting double digit gains early this morning, closing in on all time highs.The Bureau of Economic Analysis (BEA) reported this morning that the final calculation of the U.S. economy’s growth for the fourth quarter revealed an expansion rate of 3.4%, higher than expected. Gold is trading at $2206.44, up $11.65. Silver is trading at $24.59, down 6 cents. A study by the Federal Reserve Bank of Philadelphia suggests that a hypothetical return to the gold standard could lead to long-term price stability, with inflation and deflation being temporary. The working paper by Jesús Fernández-Villaverde and Daniel Sanches, published in February, examines the gold standard’s potential effects in a small open economy, concluding that the price level would eventually stabilize at a long-run equilibrium. While the gold standard historically collapsed due to its inflexibility, the authors note that during the transition, monetary changes would have long-term real effects, especially in response to economic integration or trade shocks. Despite these short-term fluctuations, they argue that a gold-backed economy would ultimately be stable and self-correcting.

DMR will be back on Monday April 1st. Have a great Easter Holiday!