Massive uncertainty has been rocking currency markets for quite some time, and due to the added volatility of the stock market, it’s not surprising that investors are steering in a different direction to safeguard against global market instability. In fact, currency market, stock market, and central bank instability are contributing to severe macroeconomic volatility on a global scale, which is changing the way smart investors diversify their portfolios.
Factors That Impact Paper Currencies
In most cases, paper currencies are affected by the following factors: politics, war, elections, national debt, global pandemics, and government expansion. In addition, there are various other political factors that affect the value and strength of the dollar. Worldwide events, changes in foreign reserves, turmoil in other countries, and the strengthening of other currencies can impact the dollar. Currency manipulation in other countries can also cause changes in the value of the dollar.
Gold as a Hedge Against the Dollar
Millions of Americans have become uneasy about the decline of the dollar and the United States’ economic future. It looks more and more like the US economy, and possibly the world economy, is on the verge of another 2008-style financial crisis. What can we do to protect our hard-earned assets from this global financial crisis that is right on our doorstep?
Some strategists and advisors are encouraging people to invest in gold, either by direct purchases of gold or a gold IRA, since gold has been a store of wealth for centuries and has provided significant protection during times in which the dollar has declined. As history has shown, the relationship between the dollar and physical precious metals is often an inverse one.
Very often, when the value of the dollar declines, the price of gold appreciates. That doesn’t mean that gold will always increase in price every time the dollar depreciates, but over the long term a weaker dollar means gold should get stronger.
Not only that, but gold is also considered a safe haven at times when the US dollar is unstable. It appears that the dollar may face yet another downfall now that inflation is picking up. And if you look at the big picture, you’ll likely notice that portfolio diversification could be the key to protecting your financial future from the declining US dollar.
In a world where the dollar regularly takes a nosedive, gold could be an important shelter from failing paper investments. By diversifying your portfolio with physical assets, such as gold and silver, you’re positioning yourself towards defending your wealth and even securing gains in a global market downfall. When unforeseen economic catastrophes strike, the gold and silver you invested in could serve as your insurance policy by maintaining or gaining value even when all other asset classes may fail.
Ready to Invest in Gold?
If you think that you are ready to invest in gold there is no better time than now. With a gold IRA, you can even roll over your existing retirement assets into a gold-backed IRA account that offers the same tax advantages as your existing retirement account. If you have investments in stocks and bonds that you are worried about losing value in the event of the dollar crashing, maybe it is time to start thinking about rolling over your assets into gold.