Come on guys lets have some clear and logical thinking.
Gold stocks are like any other inventory, something which can be increased
by investment (surplus of production over consumption). The supply curve for
gold is upward sloping, like most supply curves, and thus an increased
demand for gold inventories would increase the price of gold. The increase
in price would reduce gold consumption and inventories of gold would rise.
The global stock of money includes all bank deposits, not just the monetary
base of notes, coins and reserve/settlement bank balances. Individuals hold
money to obtain interest as well as to make transactions, and thus there is
a demand for money backed by interest bearing lending as well as liquid
reserves, i.e. bank money. The stock of gold needed to support a gold
monetary system is a small fraction of the stock of money, even if the
monetary base were to be 100% gold backed.
The price of gold would rise if the world were to adopt a gold monetary
system, but not exceedingly greatly. It all depends on the elasticity of the
supply and demand gold production/consumption, and the additional need for
inventories a gold monetary system would demand.
David Hillary
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