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Gold: It Has Always Been The World's Universal Currency

Updated on December 26, 2009

It is interesting to note that whenever many asset classes are subjected to global stresses they tend to drop in value while gold tends to rise in value, therefore gold can be considered as a barometer of the financial times: if the price of gold is increasing it generally means that the overall health of the global economy is decreasing. Even though the position of gold as the hub of the financial system of the world is no longer valid, (as it has been several decades since the U.S. Dollar was fixed to gold reserves) most government central banks still consider gold as a critical resource and thus hold vast amounts of it.

The most significant reason why gold has this special position is that it is an excellent reserve asset since the existence of gold does not create a liability for any other party. In no way similar to a currency, the price and the overall value of the reserve held in gold bullion is not related in any way to the policies of the nation which has issued the financial paper currency which applied at that time, and therefore the value of the gold cannot be undermined by any form of inflation which may occur in that one particular nation.

It can easily be said that the long "dreamed of" world currency has already been in place for thousands of years. It's gold.

The historical track record of gold is one which clearly demonstrates that this precious metal holds its acknowledged value on a steady basis over not just years but centuries. It is important to note that gold cannot be in anyway repudiated since it is not a liability or another individual. Investors who have adopted the long term views that unforeseen problems and crises can occur which can critically affect the value of overall assets and investments, tend to hold gold as a safeguard against these wild gyrations and fluctuations in the macro-economy.

Many portfolios of governmental central banks are assisted in the provision of diversity by gold due to the fact that it has the unique and powerful correlation to be the inverse value of the U.S. dollar and a very low correlation if any with other key currencies. Approximately 9% of all of the central banks' reserves in the world at this time are in gold.

Gold is not only the world’s population number one choice for jewellery and adornment, it is also of increasing value on day by day basis to the bio-medical and technological industries of the planet. Indeed gold is implemented in a significant number of vital aspects which affect everyday life in the developed world. There are unique properties which gold possesses which make it the only choice in an a significant number of applications such as laptop computers, mobile telephones, pollution control devices, air bags and a significant number of medical applications. Space travel itself might not even be possible were it not for gold as it is a critical component of much of the electronics that are present in any space craft.

Continued In Gold: Countless Applications In Industrial Processes

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