After seeing months of lower prices, the dollar index has been on the rebound lately, trading at a 4.5 month high in recent sessions. The upside in the dollar has kept a bit of a lid on gold prices-for now anyway-and the relationship between the metal and the currency is a very important one to understand.
Like many other commodities, gold is denominated in dollars. This means that when the dollar is higher in value, gold becomes relatively more expensive for buyers in other currencies. On the other hand, when the value of the dollar declines, gold becomes relatively less expensive for buyers in other currencies. This is why there is often a strong correlation between the dollar and gold.
Although the dollar has been moving higher recently, it is still in a longer-term downtrend. The dollar has been losing value for decades, purchasing less and less as the years go by. As the dollar weakens, so does the value of your assets as well as your purchasing power. If you think things are expensive now, consider this for a moment:
What if a gallon of gas was $6 instead of $3?
What if a loaf of bread was $5 instead of $2?
What if your cable bill went from $100 per month to $200 per month?
It is these costs of everyday goods and services that are set to go up as the dollar declines further. As the currency weakens and inflation takes hold, not only do prices go up, but the net returns on your investments go down. This is because each dollar returned now buys less.
Given the fact that the dollar decline is nothing new, investors not only should but need to have assets in their portfolio that can provide an effective hedge against dollar weakness. Physical gold should be at the top of the list. This asset class is unmatched when it comes to inherent value and reputation. It is coveted and traded all over the globe, and is viewed as a store of value and medium of exchange anywhere on the planet. It is widely viewed as the only real form of money there is.
Gold has been considered a reliable store of wealth and value for centuries. Not only does the metal have enormous upside price potential, but it may provide an important hedge against inflation, weaker currency values, deflation and other economic issues. If you don’t already have a significant allocation in gold, now is the ideal time to get started. Adding this key asset class has never been easier.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership and why you simply cannot afford to do without it. Our associates are here to answer any questions you may have, and can even show you how to incorporate this key asset class using your IRA account.
As other paper currencies have shown, the dollar will continue to decline in value, eating away at net returns and purchasing power along the way. The time to take action is now. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, correlation, dollar, dollar index, gold, purchasing power