Even when Gold is not in circulation, it still performs its marketplace function as the measure of value. The only difference is that it involves an intermediary.
Today we use currency – debt notes – fiat – call them what you will. This places Gold’s function one pace away from the action. Instead of measuring the value of goods directly, Gold measures the currency’s value and then the currency is used as the measuring tool.
As a derivative of Gold, a currency is always dependent upon Gold to establish its value. When Gold places no bid on a currency, then no amount of QE, interest rate tinkering or legislative coercion will alter the fact that its value is zero.
Look not to the ‘price of Gold’, for the price of an ounce of Gold will always be one ounce of Gold. If you wish to see what is happening in front of your nose, look to the trend in the price of currencies.
We are heading toward a time when there will be no intermediary.