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Gold: Historical Hedge Against Crises & Inflation

Updated on December 26, 2009

The importance of gold also extends to its value of protection against the inflation levels of a country. These may reach astronomical levels at any given time and it is this hyper-inflation which triggers massive weakness of national currencies which may then face sudden and unforeseen devaluations.

The most significant and universal aspect to the value of gold is that one ounce of gold is worth the same everywhere in the world at any time with no notable variation whatsoever. If an individual has an ounce of gold in their hand, they can get the same "universal value" for it in the New York Jewellery District as they can get in a remote mountain village in Asia. This "universal value" essential allows gold to have a historical tendency to be a far more stable investment and possess a level of lasting value which paper money does not have and never may have, especially in Third World nations.

The persistent and powerful problems of these developing countries as pertains to currency devaluations and inflation levels which can reach double and triple figures from year to year also help to strengthen their commitment of their population that whatever wealth they are able to accumulate should be safe guarded and stored in the form of gold. The majority of all the manufacturing of jewellery occurs in these developing countries and interestingly the proportion of this manufacturing of gold jewellery is rising year on year.

The countries which have seen their gold exports to the more developed countries skyrocket in the last couple of years include India, China, Turkey and Thailand. The sale of the locally manufactured jewellery (which is essentially constituted of gold) to tourists and the tourism trade has become a significant part of the commercial structure of countries such as Egypt, Turkey and even Dubai.

In the last few years most developed nations have seen inflation which has been negligible or entirely nonexistent. However at the same time in many of these Third World nations that are listed as developing, the currency depreciations and high levels of inflation have been an inherent malaise which has had an enormous negative impact to the financial well being of the country and its people. Due to this high level of domestic inflation and the extremely prompt and quick depreciation of the national currency, the hardship which has been caused to millions of people in the Third World is actually incalculable.

From approximately 1980 to the year 2000 the overall international price for gold did not outperform the international markets. It was always fairly steady state but in many Third World countries was still considered a superlative investment. When it is taken into consideration that various world currencies such as the Turkish Lira, the Indian Rupee or the Vietnamese Dong could be easily and virtually universally converted into gold, it is evident that this ability would purchase the individual who was the now the gold owner with a greater sense of stability in their investments.

Continued In Gold: Trusted Safeguard Against Currency Devaluation

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