Is Gold Overtaking The Dollar As The World’s Preferred Investment?

Dollar values are falling, and many countries are recalling their gold reserves. Are we witnessing a resurgence in the gold standard?

Demise Of The Dollar And The Gold Rush

The last century truly belonged to the United States. Commercial and cultural dominance following the Second World War meant that for many year, the dollar was regarded as the most reliable reserve currency in the world. This is all starting to change, and it looks like we may be taking a step back towards the gold years. For many years the dollar, and other currencies for that matter, were related to their worth in gold. This concept was what backed up the idea of paper currency. Thanks to the unprecedented gold reserves that the US enjoyed in the last century, investors around the world were able to confidently stake their investments on US dollars that represented real worth. Thus America was able to establish itself as the home of the world’s financial investments.

The US Dollar Was At An All Time High

By the middle of the century, the Federal Reserve was printing more money than the reserve funds allowed for. The price of gold was rising year on year, meaning that it was not longer practical to stake an entire financial system on its worth. After a point, no US currency was backed by gold, and simply represented an agreement between the holder and the bank to honour the value of a banknote. As the value of gold got higher and higher, the US dollar was swiftly losing value. As a result, the US government played a convenient sleight of hand that put them back on top. Henry Kissinger arranged for Saudi oil to be valued in dollars. America had significant bargaining power with the Saudis, and were a huge customer for oil imports. By forcing countries around the world to pay for Saudi oil with American dollars, they were able to push its worth up again. The Petrodollar was born.

However, the global climate has changed significantly since those days. Today, Russia has become the world’s number one oil producer. And China is now the main importer of oil, driving forward the expansion of their cities and economy. Many developing nations, as well as players in the oil industry, can see more value coming from an oil system based on Yuan rather than dollars. Both Russia and China have been fueling a renaissance in the world of gold reserves, and plan on using their stockpiled funds to turn the markets round and push the Yuan into becoming what the dollar was fifty years ago. As a result, while the dollar is gradually dropping in value once more, gold prices are on the up.

Nations Are Recalling Their Gold Reserves

Many countries are now reassessing their approach to gold reserves. Dollar investments are increasingly being seen as unreliable and a waste of money given the direction that world economics is going in. The Hungarian National Bank is recalling its 3 tons of reserve gold from the UK, in order to set up a working gold reserve at home. Other countries are starting to head in the same direction. Germany has recalled billions of dollars worth of gold, again starting their own reserves. If more countries follow suit, we could indeed see a real surge in gold investments.

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