Friday, September 9, 2011

How Much is Gold's Value REALLY Increasing?

As many of us know, the price of gold has recently surpassed 1,800 USD per ounce. This is a record-high price, but there is seemingly no end in sight for the constant rise in gold prices! Various economists and investment-brokers claim that this price increase will have to peak at some point, but what if, in reality, the increase in gold prices is mostly caused by a decrease in the value of the US Dollar?

If note is taken, there is virtually no change in the amount of oil that can be purchased with one ounce of gold. If we look at the trends of the Euro and the US Dollar, they look similar to the trends of the price of gold. Is it too bold to suggest that gold is not actually increasing in value so rapidly, but the dollar's value is actually dropping? Of course, like all commodities, gold will increase value over time at least gently, but the purchasing power of the dollar is reducing, and the value of gold appears to be climbing more and more steeply.

It could be said that gold is both a worthwhile investment and a useful tool to avoid the hazards of inflation on savings. If used, even partially, as a method of savings for the future, the value would increase more quickly than the rate of inflation. It is not an absolutely sound investment, as there was a large downturn in the price of gold about 3 decades ago.

Based on inflation, the value of gold has not hit a record high. This is just one reason why economists' words should be taken with a grain of salt. Perhaps the government should take another glance at gold as a viable source of currency.