Last week the price of gold rose to $1,100, the highest ever recorded. Gold is still an important measure of the world economy. The theory of the 19th-century gold standard was that gold was “real money” in the same way as landed property was “real estate”. All types of paper money are capable of being created by banks or governments, so the supply is potentially unlimited. It was observed that gold holds its purchasing power over centuries, whereas paper money tends to depreciate towards the value of zero.

Of course, the rise in the gold price reflects the weakness of the dollar as well the strength of gold. I have been writing about the significance of the gold price since the early 1970s. The latest rise in price reflects the significance of gold as...