Gold is hedge for currency devaluation
Do you need to hedge against currency devaluation? Absolutely – Global central banks have been cutting interest rates and doing Quantitative Easing (aka “Money Printing) since the Global Financial Crisis in 2008. The end result of this is devaluation of your currency.
Furthermore the devaluation of currency is intentional! Governments are in a race to the bottom to devalue their currencies. Devaluing a currency makes a country’s exports cheaper and stimulates the economy. The economy may win but wage earners will lose because your purchasing power has reduced. IG markets gives more explanation about Currency Wars and why governments wage them.
Currency Wars Explained: A Guide to Devaluing Currencies
Compare your currency’s exchange rate to the USD and to the gold price and see how much your currency has devalued. For your convenience we have done the analysis for a selection of currencies below:
Malaysian Ringgit (MYR)
The Malaysian Ringgit has lost 40% of its value since 2011. Over the same time period Gold has increased 150%!
The Singapore Dollar lost 11% of its value between 2018 and 2020. During the same time Gold price increased 35%.
Australian Dollar (AUD)
The Aussie Dollar lost 20% of its value between 2018 and 2020. Over the same time frame Gold increased 51% !
You can repeat the above analyses for other currencies and the results will be similar. So what do you think? Do you need a hedge for currency devaluation?
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