Is there a role for gold in monetary policy?
Gold has played a major role in the history of money and monetary policy. With the abandonment of convertible money and the adoption of fiat money, the integral role of gold in monetary policy disappeared. Nevertheless, there continue to be proposals to bring gold back into a more prominent role in monetary policy. These proposals essentially take two tacks. One argues that governments should readopt convertibility of currency into gold. The second argues to retain fiat money, but to use the price of gold as an early indicator of changing price pressures. Both of these proposals imply an enhanced role for gold in monetary policy. This article examines both proposals.