This article will examine the argument for a gold price, based on a single currency, also possible alternatives.

In this article we predominantly talk about gold, the exact same things apply to all other (precious) metals, so these can be added to the argument.

The why

It makes some sense; all assets (including cash) must be listed in a quantifiable manner, so a single fixed currency to value a global resource does provide clarity. At moment of writing, this currency is USD, from the United States, which was not only the biggest economy but also a highly influential country, so it logical for them to have this great honour. Before USD, it was GBP; the British empire ruled a large part of the world for some time, until the second World War broke out.

We at Opinion Economics do believe it a good thing that the biggest economy is used in a way to value gold, simply because that currency is  likely to be the most used for transactions. A fitting quality for an asset that could be considered money in metal form. Having a gold price per currency is possible; it would just create many different prices and opportunities for large scale traders, as gold can be transported and sold anywhere. Hence creating the need for a centralised valuation mechanism. But more on that further below.

Should be noted that the primary precious metals organisation is not located in the US, but Great Britain. Also quite a few big names located in former British colonies, and mainland Europe. So we are not fully dependent on the US for our gold, it actually is spread out quite nicely. That it possibly one of the benefits from having a centralised price; everybody knows how much gold costs and, depending on localised restrictions, can buy it in USD.

Benefits

• We now have a guaranteed (fluctuating) global price instead of a local one that changes based on which currency is used. A anchor in the wilderness of currencies.
• High market liquidity from using the predominant currency. This is particularly relevant for going short/long as gold always was, and will be, fully liquid.
• Bigger players need to report across different global systems, for which a fixed price is a near prerequisite. Lacking a single price, every currency will need its own report, which is a lot of work and creates ambiguity on the company`s annual statements.
• The primary reason why gold changes its value, is inflation. So basing it on a single currency gives a good outlook at the possible future value based on the decision made by the governors of that currency and the factors that affect it. The exchange rate of that currency does become a source of speculation for gold.
• We no longer have to rely solely on local dealers for information, with incentives to give you a price that benefits them.

Downsides

• Pegging the price to a single currency has created possibilities to destabilise the gold price for the entire world, by selling large amounts of debt in that currency. Should be noted that smaller countries also issue debt in USD, so there are options to do this without poking the bear directly. Should be noted that any price can be destabilised by flooding it with supply, to which both gold and currencies are no exception.
• There is a big risk that the government behind the currency decides to abuse its advantage and manipulate the gold price via its own monetary supply or forward guidance: More money equals more inflation and therefor a higher gold price as money becomes less valuable. Forward guidance is sufficient for short term only as it indicates what you will do soon; don`t do it and people will stop believing you. Setting up a system where a second currency is used, possibly based on size of the economy or how many people use it as their primary currency, would not counter this; it might create a rivalry and actually give reason to start manipulating in the first place.
• Gold and silver, plus copper, have been cash for many thousands of years, some of the earliest known documents/stories list them as highly valuable. Making it a bit weird for it to be listed as an asset instead of the thing assets are listed in. In older cultures gold is listed as valuable in something that we today do not think of as money, usually a form of cattle, such as oxen. In that timeframe copper was used in basic items still, so it was money but also what you used to plough the field. Listing assets in gold value (grams potentially) is possible, but gives rise to how you value gold itself; unless we create a new system in which gold itself becomes money.
• The current way it is set up, as a listed asset, creates volatility, which it barely had for almost all of human history; much like standard returning inflation, this volatility is a new phenomenon. Normally that would not matter, but we are talking the absolute definition of value, so a little security isn`t such a bad thing. Historic volatility was largely due to a big rulers flooding the market, or some other event. Eventually things went back to normal.

Suggestion; A fixed local price point

This may seem redundant, but your correspondent has been buying and selling precious metals for over a decade and has always seen differences between parties` listed base price (supposedly without any taxes, costs or premiums). This makes having a single currency redundant as minor variations are also guaranteed if every currency has its own price, as appears to be the case in reality.

This option takes gold`s pure weight and assigns a cash value to it, this value is publicised daily by each government. It is identical to what happens when a government decides to put a break on how much foreign money can be worth, generally in an attempt to support its own currency. The government would take its gold value primarily from a centralised market maker (it ought to be a supply and demand based price), and translates that price via currency exchange rates. Buying and selling precious metals could still be left to private parties, either with or without mandated premiums. With the law dictating how much may be spent should probably be a percentage, to avoid the premium becoming an issue. Without fixed premiums, there is no real difference to our current system, when it comes to differences between suppliers. If the government decides to do all the buying and selling, potentially via banks, a role they have played in the past, it would be the same as having legally enforced premiums because there is no real competition.

This plan could be considered a continuation of the gold standard, but it is not because we are not suggestion that each bit of currency (not just physical money but also bank accounts) is supported by an equal value in gold. That would require a ridiculous amount of gold reallocated to bank vaults, out of the hands of the rich. It is possible that governments would have to confiscate gold, just to fulfil the new need to support all money in the economy with gold.

We do believe that this option will lead to shortages and excess supply as variation in currencies lead to minor variation in gold value. This currently happens every single day in currency trading: Gold is a form of currency so no big problem there, just something that needs to be taken into account.

A, partial, return to using gold and silver in coins would not be a natural part of this system: The market maker will give a new price every day, which is translated to the local currency, so the metal value of the coin would fluctuate daily. To make this successful, the metal content would have to be of a token purity to avoid it becoming an investment. This has happened in the past, as gold priced soared government simply either changed the number on the coin or reduced its size.