World moving towards new monetary system: Zoellick
The global economy is moving towards a new monetary system with gold emerging as a preferred alternative to existing asset, World Bank president Robert Zoellick said today.business Updated: Nov 10, 2010 12:19 IST
The global economy is moving towards a new monetary system with gold emerging as a preferred alternative to existing asset, World Bank president Robert Zoellick said on Wednesday.
"There's uncertainty about the future of the international monetary system," he told a news conference in Singapore.
"As I said, whether people wish to acknowledge it or not, we are moving towards a Bretton Woods III," he said, referring to a possible agreement to replace the current system of floating currencies.
Zoellick stressed that a piece he wrote in Monday's Financial Times, in which he said the G20 should bring gold back into the global monetary system to guide currency movements, did not mean he wanted a return to the gold standard.
His comments come a day before heads of the 20 leading developed and developing nations meeting in Seoul to tackle the unbalanced global economy and resolve fractious disputes that have raised concerns of a "currency war".
Gold has become a favourite choice for investors seeking higher-yield, a safe haven from volatile foreign exchange movements and uncertainties surrounding the global economy, Zoellick said.
"It's also the case though that gold is now being viewed as an alternative monetary asset," he said.
"Gold has become a reference point because holders of money see weak or uncertain growth prospects in all currencies other than renminbi (yuan) and the renminbi is not free for exchange.
"So in relative terms, gold is appealing to people who ask 'where should I put my money'.... it's a hedge on uncertainty."
He added: "I think the US dollar will remain dominant but people will look at alternative investment sources."
Under a new system he said "the key currencies will be the dollar, the euro, the pound, the yen and over time the renminbi (yuan) as it internationalises and moves towards an open capital account".
Zoellick has said previously the world needed a new regime to succeed the "Bretton Woods II" system of floating currencies, which has been in place since the fixed-rate currency system linked to gold broke down in 1971.
Regarding his comments in the FT that gold should be used as a reference point in the new monetary system, he said: "People may not like the idea... but it's already happened and markets are already using gold as an alternative monetary asset.
"That's not saying there should be a gold standard. It is saying that we are having problems with confidence that needs to be fixed."