Is Australia back on the Gold Standard

The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold; with all currency issuance is to one degree or another regulated by the gold supply.

In modern mainstream economic thought, a gold standard is considered undesirable because it is associated with the collapse of the world economy in the late 1920s, and that aggregate supply and demand is a far better means of regulating interest rates, money supply and monetary basis.

The last vestige of the Gold Standard all but disappeared after the Bretton Woods system collapsed in the early 1970’s.

However, we were skimming through an article on Bloomberg this morning when suddenly we realized that there are still economies that are based on the price of Gold and other similar commodities. Even more amazingly there is an economy in the OECD where exchange rates are effectively tied to the price of Gold and commodities.

Australia.

The country’s currency is tightly linked to the price of commodities as raw materials make up a full 60 percent of its export’s; it is also the world’s second largest producer of Gold.

In reaction to the situation in North Korea, Gold prices recovered slightly overnight though the expected clamor didn’t happen. Contracts for December delivery of bullion were up $6 to $582.80 an ounce on the Comex division of the Mercantile Exchange.

The Australian Dollar closed up at $US0.7451 up 0.23 cents.

Source

Australian Dollar May Rise on Higher Prices of Gold and Nickel  Bloomberg