Gold Derivatives Gold has been a very important element to humanity since before recorded history. It has many uses including currency, jewelry and art. It is unique because it is very malleable, resists corrosion and is an excellent conductor of electricity. For these reasons, the demand for gold has increased simultaneously with population growth throughout history. Gold investments have their place in every portfolio, whether used to hedge against inflation, speculate or simply to diversify across different assets. Many investors choose gold, because our dollar, as a fiat currency, is very unstable by nature. I think G. Edward Griffin explained it best when he wrote: “Fiat money is paper money that is unbacked in precious metals and that people are required by law to accept. It allows politicians to increase spending without raising taxes. Fiat money is the cause of inflation, and the amount that people lose in purchasing power is exactly the amount that has been taken from them and transferred to their government through this process. Inflation, therefore, is a hidden tax. This tax is the most unfair of all because it falls mainly on those who are least able to pay: small wage earners and those who receive a fixed income. It also punishes the thrifty by eroding the value of their savings. This creates resentment among the people, always leading to political unrest and national disunity. Most countries today use fiat currencies, and this worries all supporters of sound money. A disruption in our government can dramatically affect the value of our dollar. The U.S. government has added a trillion dollars to the U.S. dollar supply over the past year. This house of cards can only last up to a certain point and when a large number of citizens simultaneously lose faith in... sources of credit in the middle of the paper. The Minders discovered that they could be involved with the central bank and their new gold loan offers. These gold loans were prototype derivative products. Mining companies borrowed gold from the central bank and sold it to raise capital. They then repaid him with the gold produced by their new projects. Because these projects were financed through metal lending, this new production was subject to price risk, which mining companies decided to manage through increasingly sophisticated gold-based derivatives. This has created a brand new market for a whole range of derivative products, from basic futures contracts to vanilla and exotic options, as well as any combination of these products you can imagine. Thus was born the gold derivatives market, which has continued to evolve. from there.Works Citedhttp://www.virtualmetals.co.uk/pdf/ABARESpeech.pdf