The value of the dollar relative to the value of gold. As the dollar loses value, gold gains value. Why is this the case?
In: Economics
The dollar and gold’s value are not directly linked. The US hasn’t been using a gold standard since 1933 and no country in the world uses it at this point. However, people still view gold as a reliable investment to store value.
That is the key idea that can explain why the dollar going down would increase the value of gold. People who are nervous about the value of the dollar may decide to keep some of their savings in the form of gold. For example a paranoid “prepper” who thinks some massive disaster is coming that will end all utilities, destroy law and order, turn the world into Mad Max, etc. is likely to keep a stash of gold in their bunker alongside their firearms and canned food. If the dollar goes down in value they pivot to buying more gold out of fear, driving up the price of gold.
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