Gold and US dollar have been the unquestioned ‘safe havens’ since time unknown, but gold looks set to outshine dollar, which has deteriorated severely, thanks to the loose monetary policies of the Fed and the ever-increasing, insurmountable national debt. The yellow metal has never failed the mankind in its 5000-years of existence while the fiat currencies have always disappointed.
In Rome, there is a myth that in ancient times, an ounce of gold could clothe a man from head to toe with a toga, sandals and a belt and it can be easily said that the precious metal has revalued its purchasing power and can still clothe a man with an ounce of gold. However, the same analogy cannot be applied to the dollar, which has failed to sustain its inherent value and is weakening every day with new dollars being dumped into the system. Unlike dollar, which can be printed at the whims and fancies of the central bank, gold is limited in nature and hence, is anti-inflationary. There is only a limited amount of gold that can ever be mined and hence, it can revalue itself owing to the increasing demand and limited supply. Gold has plenty of uses, such as in alloys, as a conductor, as jewelery and ornaments along with the foremost purpose of wealth protection.
Traditionally, investors used to rush to buy gold and US dollars in times of crisis, but recently the participation of investors as well as governments and central banks has increased significantly in gold. The metal has proved itself to be the best hedge against the inflation and the geopolitical crises and as a result, investors are now hoarding gold with their dollars against the backdrop of anticipated interest rate hikes, higher inflation and unprecedented geopolitical fears.
By: Nikhil Gupta, Financial markets Researcher/Analyst