One of only two economists that I read wrote this week about the volatile moves in Gold’s price being caused by rampant speculation. I understand that he knows better, and was using the terminology for ease, but it serves to perpetuate a gross confusion in the area of money.
Gold is never bought and sold. It is always currencies that are being sold and bought.
Though we all use the upside down and back-to-front POG charts, we should always translate the picture for what it really is – fiats strengthening and weakening.
Always and everywhere, in all circumstances, Gold is measuring, not being measured. Just because what is happening is not understood, does not stop it happening.
Brexit? People withdrew from the volatile nature of the currency market by exchanging their fiats for Gold. If you suddenly have no idea if a currency is going to go up or down, then you get out of it – pronto.
And that is what happened. Were there some traders who were trading Gold because they thought that it would move? Of course, but even they were still selling fiats, not buying Gold. They were just clueless about the process in motion.
It is true that rampant speculation can push prices too far in either direction. Currencies can definitely go, and stay, way too low or way too high for way too long, but it remains a fact that the movement is always in the currencies, never Gold.
Gold’s value doesn’t move, ever. In a universe of non-absolutes, Gold is as close as it gets. That is why it is the one and only money.