Gold serves as the counterweight for the U.S dollar regardless of the fact that most claim the two do not go together. In spite of the fact that it is the reserve currency of the world and is of very high value, in demand and confidence the dollar stands to be above gold. The value and demand of gold increases when the dollar’s confidence is low making the two go hand in hand.
There are exceptions where the dollar and gold have behaved in the same manner in that they were both weak and in the same direction but because of many unrelated factors. Also, there are those periods when the two have gained value at the same time although it is very rare to experience this kind of a phenomenon.
Gold – real money
The reason as to why gold is the counterweight to the dollar is that it has been the monetary system of the world for centuries. The world developed into paper currency back in 20th century with the US emerging tops in military power and economy; hence the regarding of the dollar as safe for institutions and investors all over the world.
Amazing track record
Gold has set a remarkable track record as a trusted medium of exchange and a value store. It also came back into its safe mode when fiscal policies and monetary policies eroded the dollar value, especially during the weak times of the dollar. There are several episodes in which gold has proven to be a real store of value and a medium of exchange.
The other reason making gold a counterweight is that it is normally priced in dollars and more so, US dollars. This means that the moment dollar value goes down, gold prices rise and when dollar value increases, gold price is likely to go down. However, this holds a small market proportion with the rest relying on the selling and buying of gold.
It is true that dollar value drops can affect an entire country as well as have a negative effect on the investor whether an official, institution or individual, provided he holds a dollar asset. Dollar declines may also bring lots of gains to the very same holders making them much wealthier.
When looking into buying gold coins, it helps to make a point of understanding the markets, the pros and cons and everything that appertains to to it.
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