The US dollar has fallen sharply in value over the past six months. The US dollar index (DXY) fell by almost ten percent. For a currency, this is a very large loss in quite a short time. At the same time, the price of gold has risen by around 20 percent.
Against this background, it is not surprising that many voices arose in the USA in particular, warning of the US currency’s demise and in the same breath recommending gold as security. Commentators in Europe also dealt with this topic.
Perspective is crucial for looking at the topic. It can easily lead to distorted perceptions, as certainly countries like Russia and China are working to break the US dollar’s current dominance as the world‘s leading trade and reserve currency. And of course it is noticeable when countries like Saudi Arabia suddenly turn away from the US dollar and also accept other currencies as payment for their oil or their raw materials.
The world currently lacks alternatives to the US dollar
However, a substitution of the US dollar cannot even take place overnight if an equivalent alternative is available. Such processes take time. The Chinese in particular are aware of this, as they are also aware that their own currency, the yuan, is far from being developed to such an extent that it could already succeed the US dollar as the reserve currency.
Gold would have the confidence needed to take the place of the US dollar. Here, however, the problem is different. Many countries have far too little gold. Like Great Britain, they have largely sold their gold reserves or have neglected to increase their gold reserves sufficiently in recent years.
It is true that many central banks in emerging and developing countries are currently massively on the buyers’ side when it comes to gold. But the world is still a long way from a new gold standard, because this would not only mean that significant gold stocks must be available.
There is also a lack of serious will to replace the US dollar now
The states and their central banks would also have to be prepared to give up control of the monetary system, because in a gold-backed currency system it is far less easy and as arbitrary to manipulate as it is possible in the current fiat money system.
Since there is still no sign of this willingness, it is probably still much too early to sing the swan song to the US dollar and the other fiat currencies. However, that doesn’t change the fact that gold and silver are just as valuable and useful for private asset protection today as they were in the past.