The impact of monetary gold

The impact of monetary gold

Gold is one of the metal, because of its outstanding obligations, in the investment world's most extensive and clients came. Although gold is not used as the main form of currency in developed countries, but it is still on the value of these currencies have a great impact. There is a strong relationship between the strength of its value and currency trading foreign exchanges.

To help show the gold and foreign exchange trading relationship between this, consider the following five important aspect.

1. Once used for backup legal tender gold.

As early Byzantine Empire, gold was used to support legal tender, or in their countries began to consider various currencies legal tender. When President Nixon stopped gold the same as the world's reserve currency, the United States through most of the 20th century; requirements for the use of gold until 1971.

Until the gold standard was abandoned, the state can not just print their legal tender ad nauseum, unless they have the same amount of gold. The world is no longer used in the established gold standard, some economists believe that we must go back to it as the U.S. dollar and other currency fluctuations.

2. Gold is used to hedge against inflation.

When their country is experiencing a high level of inflation, investors usually buy a lot of gold. Increased demand for gold in times of inflation, due to its inherent value and limit supply. Gold, because it can not be diluted, ability to retain value much better than other types of currencies.

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In April 2011, investors worried about declining cost of legal tender and gold deserves to be driven to a staggering $ 1,500 an ounce. This suggests that there is little confidence in the currency on world markets expected future financial stability grim.

3. Gold price affected countries, which import and export.

The value of a country's currency closely the value of its exports and imports. Therefore, a national export gold or gold reserves will increase the money into stronger when gold prices, taking into account the country's total exports value added.

Simply put, boost ratio, can generate trade surpluses or assistance to offset the trade deficit. On the other hand, a large gold imports winding country will inevitably weaken the currency, the gold rising speed. United Nations specialized production of items made of gold, but the lack of their gold reserves, the gold importer. Therefore, they will be particularly prone to enhance the rate of the gold.

4. Gold investment tends to reduce the value of money to buy.

When the main banks to buy gold, it is affecting the domestic money supply and demand, and may lead to inflation. This is mainly because banks rely on printing more cash to buy gold, thereby creating excess money supply Fiat facts.

5. Gold prices are usually used to determine a regional monetary value, but there are exceptions.

Many people mistakenly use gold assess a country's currency as clear-cut agent. Undoubtedly a relationship between gold prices and the value of fiat money, it is not always a lot of personal commitment to the inverse relationship.