REASON FOR THE CONTINUITY IN THE RELEVANCE OF GOLD AS FINANCIAL INSTRUMENT IN THE INTERNATIONAL TRADE

In the time past, international trade has been carried out among two or more countries base on what the country involve has to offer and the relevance of his offering, some country that offers gold as a monetary instrument tends to have upper-hand than any other countries due to the value and worth of gold as at that time, they believe gold has different uses and that it can never be useless due to be intrinsic value. One of the international trade theory that supports gold as a means of exchange is Mercantilism which is an economic system that is developed in Europe during monarch period in C.1500, the theory is been postulated by Thomus Mun.

The Relevance of Gold in the Past in International Trade
As of ages, gold has its relevance as Mun principles stated some principles as to countries belief
• The Countries involve belief that the amount of world wealth was relatively static; which can be in term of gold, since gold has a stable value
• The belief that countries wealth can be determined by the number of precious metals or bullion it possessed like Gold since it’s the most valuable precious stone

INTERNATIONAL TRADE
International trade simply means an exchange of goods, services, and capital across national borders of a country. It exists between two or more countries. in which settlement are made via financial or monetary instrument. this article centre on financial instrument.

Financial instrument
A financial instrument can be regarded as a monetary contract that exists between two or more parties. It can also mean evidence of ownership or part of the ownership of something, which can be regarded as shares and stock.
In nutshell financial instrument is any or all contracts that can give increase to the worth of financial asset of an entity.

The Financial instrument can be classified into Derivatives and Cash Instrument, and to this article, we are centering on the derivative instrument,

Derivative instruments
A derivative instrument is an instrument whose worth is derived from the value and features of an Underlying Asset. Which can be regarded as a contract whose value is derived from the activity or performance of the underlying asset? These have links with bond, stock, and Forex and cryptocurrency. Gold can be regarded as a monetary instrument of a financial instrument, which can be term as Digital Gold in the long run.

How to Buy Gold-based Financial Instruments
In this current world, many choose to buy gold-based financial instruments (Digital Gold And ETF) instead of buying real gold. With these investors has a chance to capitalize on changes in the price of gold without considering where to store physical gold. This is been done with the use of ETF know as Exchange-traded funds or Digital Gold

Exchange-traded funds (ETFs) are one of the safest means of investing in gold. Since it is similar to a unit trust fund or mutual funds, this is run by fund manager which tends to run it on behalf of investors and it gets it traded on the stock market. The exceptional part of it is that it is highly liquid.

Digital Gold:
Digital gold is run as of the same way as ETF but the difference is that EFT is been run by the third party which is not so in Digital gold. Digital Gold tends to give investor direct channel to buy gold with tokenized gold and customer does not face a risk dealing with a broker. As it also allows users to trade to their satisfaction with non-disclosure of identity.

Features of Digital Gold
• Digital encourages a cheap-cost token with no transfer fees
• It gives room for an individual to diversify his portfolios, thereby keep his asset is a safe place
• With digital gold their Secure ownership
• In Digital Gold there is a high level of liquidity
• There is a guarantee life span of the GOLD purchase

The Relevance of Gold in the Present in International Trade
Though as of now international trade payments are made via accepted currency of the exporter. Nevertheless, the most acceptable currency international trade are always in dollars and some other currencies also, in which they are backed up by gold, since they practiced fixed exchange rate, which means they have a gold reserve, and the stronger a country gold reserve the stronger the value of it currency, this show that payment is still basically made in gold but indirectly; it can be deduce that since the most acceptable currency in international trade are backed up by gold, the relevance of gold cannot be underestimated in international trade.

As of now gold relevance as been increased other thank been means of payment as it use to create jewelry, used in an electronic and others which can then be sold internationally, as it the most trusted commodity or instrument whether financial or monetary Exchange and Trade between countries.

The Bottom line
Gold relevance in international trade is unquantifiable as it tends to determine the value of the currency that an importer intends to pay during or after the exchange of goods and services across nationals boundary, on the otherhand is also a financial instrument as it serves as means of individual getting gold with the use of tokenized gold and thereby eliminate third required in the ETF.

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Reference:
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consider my other article in linkedin on gold
https://www.linkedin.com/pulse/gold-based-financial-instrument-other-adebowale-oyetunde/?published=t