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Thursday, September 1, 2011

Status Change: Gold Moves From Investment To Money

by Rich Danker

Big banks do not typically give themselves over to political pronouncements, but that did not stop the Erste Group from declaring on the front page of its gold report published last month, ?The foundation of a return to ?sound money? has been laid.? The Austria-based financial services provider surveys the new dynamics of gold and monetary policy and finds that not only is its price likely to continue to rise, but so will its acceptance by governments as money.

?The past months have shown a clear trend: gold has been more and more regarded as the purest form of money and increasingly less as a commodity,? writes Erste analyst Ronald-Peter Stoferle. He tracks this status change in the way financial institutions like J.P. Morgan are accepting gold as collateral, states in the U.S. are pushing to declare gold as legal tender, and foreign central banks are adding it to their reserves. Why the movement to gold per se? It is an emphasis on asset-based rather than debt-based money. As Stoferle puts it, ?The possession of gold is tantamount to pure ownership without liabilities.?

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