Global Instability of Gold Prices: View from the State-corporation Hegemonic Stability Theory
Purpose: The purpose of this paper is an explanation of reasons of gold prices instability after the establishment of the free gold market in 1968-1974. Subject of the analysis, i.e. the gold has been chosen because of its big strategic importance as a reserve metal for states and business over the world. Therefore, prices of the gold are connected with the global political-economic situation. Design/Methodology/Approach: The design is a new application of the theory of the state-corporation hegemonic stability, i.e. a new contemporary theory of international political economy. The research method is a describing political-economic analysis based on statistical data. Author analyses the gold prices in particular time periods and according to the state-corporation hegemonic stability theory. Findings: According to presented point of view, fiat money in circulation and a lack of fixed gold exchange standard in connection with a relatively stable global political-economic situation are the most important reasons of unstable and relatively low market prices of the gold in long time periods. However, disturbances of the world system cause fast and relatively big growths of gold prices in short time periods. Therefore, the global instability of gold prices is a phenomenon of the contemporary world. A destruction of the global system or world war in the future can cause a big increase of gold prices. Moreover, in the longer run, a further growth of prices of the gold will be probably unavoidable because of inflation in spite of periods of their drops. A fiat money system without any established gold parity adds monetary advantages for the contemporary global market economy, i.e. opportunities to increase money supplies in spite of a lack of gold reserves. Therefore, according the state-corporation hegemonic stability theory, state-powers and biggest transnational corporations are not interested to change the fiat money standard into the gold money standard. Practical Implications: The result can be considered for short-term and long-term investments in gold. Originality/Value: Original research based on the new theory.