This short(ish) article from zero hedge is about the gold standard and the the way that emerging central banks are treating Gold. http://www.zerohedge.com/news/spot-difference-between-these-two-gold-holdings-charts
From the original research: www.voxeu.org/index.php?q=node/7739
"The patterns of gold holding remain a debatable topic at times when the relative price of gold has appreciated while the global economy has experienced recessionary effects. The curious patterns of gold holding and trading by central banks from 1979 to 2010 suggests that a central bank’s gold position signals economic might, and that gold retains the stature of a ‘safe haven’ asset at times of global turbulence."
I see a pattern here. In a country's rise to economic strength, it seems that precious metals and other such hard assets are viewed as the underpinnings for future economic strength, especially in times of trouble (i.e. Greece, Rome, England, the US, and now the BRIC). However, it seems that as a country's wealth and power reaches critical mass, hard assets are pushed into the background and are replaced with fiat currencies, which are fundamentally predicated on the view that 'we will continue to produce wealth'.
For example, in the US, once the gold standard was removed in the 1970's, the US found another asset - oil contracts - to replace gold. Note that it wasn't oil itself, but the fiat currencies of international oil contracts and bargaining, which then underpinned the dollar. This stroke of brilliance led the dollar to be pinned to nearly every hard asset contract being traded in the market - but not the hard assets themselves. This allowed the Fed to essentially print massive amounts of currency units (in fact, much more than was being produced yby the economy) without fear of debasing the currency. Unfortunately, the problem is that "the medium is the message". The shift from the gold standard to the commodity contract standard led to a fundamental shift in psychology among the people. The market now believes that other contracts, not just for hard assets, but for just about anything (i.e. bonds and treasury notes) have intrinsic worth, and thus can be traded as if they were an actual commodity; hard assets. Worse, many people believe that the currency itself has intrinsic worth.
In reality, government debt instruments are simply another form of fiat currency, bought with fiat currency, which is all underscored by the ability of the US dollar to retain its status as a global commodity contract currency. As this eventually unwinds, commodities are surely going to be wildly volatile in price, and profitable for those who have the edge to stay on top of what is just around the corner.
