HomeGoldThe role of gold in a multi-currency reserve system

The role of gold in a multi-currency reserve system

The US dollar has been the preeminent reserve currency for decades. Now times are changing. Dr Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong, assesses the role that gold could play in the new era.
Yet gold’s role in this vibrant and growing industry is broadly unrecognised and often misunderstood.
AUTHOR: Aram Shishmanian, CEO World Gold Council
Even as electronics demand rebounds, a number of other forward-thinking industries are turning to the precious metal.
In healthcare and biotech, there is growing excitement about the potential of gold nanoparticles in such wide- ranging areas as diagnostic testing, gene therapy, skin reconstruction, and antiviral drug production.
And, as Canadian biotech firm Sona Nanotech highlights, nanoparticles may soon play an integral role in cancer treatment too.
Speciality chemicals and sustainable technologies company Johnson Matthey has pioneered the use of the precious metal as a catalyst in the production of polyvinyl chloride (PVC).

This would replace mercury, which is extremely toxic and associated with serious health issues, when not handled with exceptional care.

Using gold therefore, could prove highly beneficial and Johnson Matthey is actively working to drive this change.

Gold’s contribution to the technology sector underpins its value in the modern world and its ongoing role as an industrial commodity.

However, it remains a valuable financial asset too.

Dr Andrew Sheng, Distinguished Fellow of the Asia Global Institute, advocates that central banks should increase their gold holdings, as the world moves from an international monetary system dominated by the US dollar to a multi-polar currency system.

Dr Sheng points to gold’s multiple benefits as an asset that delivers long-term returns while reducing risk and increasing liquidity.

Brunello Rosa, economics expert and CEO of Rosa & Roubini Associates, also subscribes to its benefits within a diversified portfolio.

Assessing the political situation in Italy, he predicts that volatile times lie ahead and suggests that gold could be a useful asset to hold in such an environment (see: “Italy and European political risks suggest defensive positioning“).

And Matthew Turner of Macquarie also points to the stability of the commodity in recent years – in stark contrast to many other asset classes.

Across the world, gold is increasingly entering the mainstream and becoming part of the global dialogue among policy-makers, opinion formers and leading institutions.

Our inaugural Investment Summit, held in New York earlier this year, analysed key challenges within the investment community and the precious metal’s potential contribution as a long-term, stable, store of value.