The Battle of Gold vs. the Dollar
As President Obama and Congress grapple with the continued weakness of the US economy, the battle of gold vs. the dollar continues to rage. The weakened value of the dollar has produced at least one strong business commodity; gold has solidified its place as a popular investment vehicle. As the White House and Congress debate health care reform and a second stimulus package, gold prices continue to soar, leading many more people to invest in gold coins and bars for protection from what could be the start of the dollar’s worst performance in history.
While the US is not on a gold standard, there has historically been an inverse correlation between the two. For example, the period of 2001-2004 saw prices for gold vs. the dollar that were nearly mirror-opposites in their 200-day moving averages, with the dollar starting the period as the more valuable, only to drop far below the value of gold as concerns over the world economy and the stability of the dollar increased.
One reason for this inverse relationship of gold vs. the dollar is the fear of a catastrophic financial event. In times when economic conditions become unstable, many people look to gold as a last line of defense. Valued as a trading currency for thousands of years, people typically feel that they can spend gold to buy food and other necessities even if national currencies fail. This faith becomes more obvious as the value of gold climbs during difficult economic times.
As the US staggers with its problems, gold prices will likely continue to benefit. Since it is a liquid asset, gold has value regardless of any nation or leader. Unlike the dollar or any other currency, it possesses an understood value and is unaffected by government actions. As President Obama and Congress spend trillions of taxpayer dollars and water down your wealth you may want to diversify with tangible assets such gold bullion and certified gold products.
Stewart Lawson
Senior Staff Writer - Gold-Coin.com
