Paper Gold vs. Physical Gold
Today, most gold investors own financial instruments that track the price of gold, often referred to as “paper gold”. These credit-gold investments are only as valuable as long as they trade at parity with physical gold. While credit-gold depends on the physical market, the reverse is not true.
European Central Banks’ Role
For years, European central banks served as the lender of last resort in the gold market’s fractional reserve practices. However, with the 1999 Central Bank Gold Agreement (CBGA), restrictions were placed on central bank sales and leases of gold, ensuring that gold remains an essential wealth reserve.
