The Correlation Between Money and Gold

The Demise of the Gold Standard

Throughout human history, gold has been related to money in some way or another. The monetary system known as the gold standard, which used gold to back our U.S. dollar, was abandoned in the 70’s. Although gold is no longer a primary form of currency there remains a strong correlation between the value of this precious metal and our dollar’s value.

Valuable Asset

Today, many developed nations maintain a collection of gold although they are not using it to back their paper money anymore. We can all agree, that precious metals, and gold specifically have been, and always will be a highly respected physical asset. Gold holds great value, and investors over the years have been focusing on adding it to their portfolios.

Inverse Relationship

The volatility of the U.S. dollar against other currencies makes gold the safe haven asset. Gold can be used as a hedge against inflation and it has been historically proven to maintain or gain value over time. If you were to look at the patterns comparing the price of gold with the value of our currency, you would find a pattern. The dollar’s strength in trade verses the value of gold tend to have an inverse relationship.

Other Price Driving Elements

While the connection between gold and the dollar are important, there are also other factors that affect the value of gold. Supply, demand, economic uncertainty, political instability, market turbulence, inflation, interest rates and more can all cause the price of gold to sky rocket.

Invest Today, Your Dollar Could be Worth Less Tomorrow

The extra money that is “fueling growth” within our economy will only devalue the money that is already in circulation. That is why many investors store their assets in the form of gold to protect themselves against inflation. Contact Huntington Alternative Wealth via email or call (424)900-1464 with your questions and concerns. We can help guide you in diversifying your retirement portfolio and hedge against the volatile market conditions.