Gold Digger

Women in India, collectively, hold more gold than the U.S. Federal Reserve, is what the World Gold Council’s Managing Director for Investment said on CNBC a couple of days ago. Of course, he meant to say the U.S. Treasury, but that's beside the point. Gold has been hitting record highs as of late. Even Venezuelan President Hugo Chavez is running for the pot at the end of the rainbow. He's said to be looking to nationalize his country's reserves. People buy gold for mainly two reasons: fashion and fear.

There has even been chatter about going back to the gold standard in order to solve the global debt crisis. The U.S. is the largest holder of physical gold, outside of the typical Indian household. We dropped the gold standard – dollar to gold – several decades ago out of fear that foreign holders of our currency would cash in for the metal and bankrupt the nation. Today, our biggest fear is that China will cash in their bonds and send us right down the river. It seems that we may be working our way to a debt standard.

So, why don't we bounce back to gold standard? Instead of holding and buying debt, banks would be dealing with something a bit more tangible than an IOU slip. First, we have to understand that gold does not have any intrinsic value, it's price is based on market sentiment. Gold is priced to how we feel. It's like a mood ring of sorts. Going back to the gold standard now would mean having to bring up the value of gold, which has been kept at artificially low levels even in the face of inflation. This would sink the dollar while making foreign reserves more viable. It's the us or them scenario.

On an individual level, Indian women may have the answer stockpiling their matching gold sets in their closets and banks vaults. While the gold necklace does make that sari look fetch, it also loosens the economic noose we have around our necks.