Gold used to back the US dollar and other currencies, but that was decades ago, so why is gold still relevant today? The simple reason gold is important is because it’s an underlying asset for the global economy. Just look at the balance sheets of central banks and institutions like the International Monetary Fund: About one-fifth of the world’s supply of above-ground gold is held by these institutions, and many central banks have been aggressively expanding their holdings of gold.
Gold preserves wealth
Central banks are stocking up on gold because they are concerned about the long-term global economy. Historically, through thousands of years, gold has preserved wealth—a feature that paper-denominated currencies cannot boast of.
If we go back a few decades, let’s say to the early 1970s, one ounce of gold was worth $35. At that time, $35 could buy you a, say, a three-piece suit. If you chose to invest in an ounce of gold, its value today could still buy you a nice three-piece suit. If, on the other hand, you had chosen to keep the $35 as cash, its purchasing power would have deteriorated significantly. Should you invest in gold? Consider the fact that gold’s value is still consistently high, while your hypothetical cash investment has decreased to the point where you, today, could barely afford a dinner for two at the local diner. Inflation decreased the value of your $35, while the value of gold increased.
Gold is a hedge against inflation
In the current economic environment, the US dollar is declining, and inflation is rising. To investors, gold is an important asset because it serves as a hedge against both these scenarios. Historically, when the dollar drops, and when inflation rises, gold usually becomes more valuable. Therefore, when investors realize their money is losing value, they’ll begin shifting their investments to safe-haven assets like gold.
Globally, gold is priced in US dollars, so it benefits from a declining dollar. When a central bank wants to buy gold, it must pay in US dollars. Thus, when it wants to diversify out of the dollar, it increases the supply of the currency, driving down its value. In addition, a weaker dollar makes gold cheaper for investors holding currencies that have appreciated against the dollar.
Gold is a safe-haven investment
Today, our economic environment is marked by increasing political and economic uncertainties. History is full of evidence of crumpling empires and currency breakdowns. History also shows that during such times, investors who held gold successfully protected their wealth. So, it’s no wonder that investors turn to gold as a safe-haven asset when the news media hint at political and economic uncertainty—which we are witnessing often these days.
Whether you’re worried about a declining US dollar, inflation, or your retirement savings, you should look to gold to diversify your investment portfolio. Gold is noncorrelated to stocks and bonds, so the precious metal is an excellent choice for your diversified portfolio.
Investing in gold through Gold Alliance
We are proud of having a low-cost model that allows you to invest in the best form of gold—pure physical gold that you can hold as a real tangible asset to diversify the paper assets in your portfolio. We are currently running the best promotion in our history, and it will end by the end of this year. For every qualified transaction, we will send you 4% of the transaction in gold to your home as a special bonus.
Give us a call and let us guide you to the most proven way in history to protect and grow your wealth: physical precious metals.