The FT makes the case that gold is less and less different from zero-interest treasuries, and therefore an attractive form of collateral in the shadow banking system. If people think of gold as collateral, then the demand for it will likely continue to be substantial until debt to income ratios return to something realistic. (i.e. not for a long while).
The FT: But what happens when the music stops and there are far fewer chairs than anyone expected…? (And when the probability of winding up with no chair next time round is much higher than originally expected?) In that scenario participants begin to “eye” their potential seats ever more closely. Anyone with a stake in the game might even choose to reserve a seat by paying off fellow participants.
That process of reserving a seat thus echoes the collateralisation that’s going on today. Collateralisation equals the location and identification of real-world assets against which existing financial claims can be satisfied. If there’s a lack of acceptable assets in the system versus outstanding claims — the stakes in the financial version of musical chairs rise significantly.