If the dollar crashes, what happens to gold?

The term “US dollar crash” refers to a sudden and significant decline in the value of the US dollar, usually compared to other currencies. This phenomenon can occur due to various factors, including economic instability, soaring inflation, mounting government debt, and loss of trust in the currency. The repercussions of a US dollar crash can be far-reaching, affecting global economies and markets in significant ways.

Will gold be worth anything if the economy collapses? If the US dollar experiences a collapse, it can be challenging to determine which assets will retain their worth. Nonetheless, some popular recommendations include having a portfolio that includes:

  • Gold and other precious metals have retained their value during times of economic uncertainty. Throughout history, precious metals like gold and silver have been a reliable refuge during periods of financial instability and have retained their worth for centuries. Possessing physical gold and silver can serve as a safeguard against inflation and the devaluation of currency.
  • Real estate can act as a hedge against inflation.
  • Agricultural land may prove valuable as food is an essential commodity. Foreign currencies, especially those of stable nations with robust economies.
  • A diversified portfolio of stocks, particularly in companies with strong financial standing and a record of consistent growth.

If the dollar collapses what will gold be worth?

According to Peter Schiff, the CEO and chief economist of brokerage firm Euro Pacific in an article from Capital, in the event of a loss of faith in the US dollar and rampant inflation, the value of gold could skyrocket tenfold, reaching $20,000 (£15,170) per ounce. Schiff recently participated in a Capital.com debate with Australian economist Steve Keen, during which they discussed the potential consequences of a market crash.

Schiff suggested that the Federal Reserve’s failure to contain inflation via hesitant and delayed interest rate increases could trigger a loss of faith in the dollar. He argued that “these small rate hikes will not be enough to flatten the inflation curve. The Fed will fall further and further behind the curve.”

How much will gold be worth if the dollar collapses.

That is an intriguing question. In the past, there was a notable occurrence between 2002 and 2008 where the US Dollar (market symbol DXY – the US Dollar Index) experienced a significant decline in value, dropping by 45% from approximately 120 to around 70. During this period, the price of gold quadrupled and continued to rise, along with the price of crude oil, which surged from under $25 per barrel to a peak of $143 per barrel. As a result, gasoline prices at the pump soared from about $1 per gallon to around $4 per gallon.

However, it is essential to recognize that economics lacks rigid rules or laws, and each era possesses its own distinct characteristics. Consequently, what may have been effective in one era might not necessarily yield the same outcomes in another.

Presently, the dollar index (DXY) stands at 99.66, a slight decrease from its level of about 100 roughly a year ago. However, due to factors such as remote work arrangements, reduced air travel, decreased petroleum consumption, and stable crude oil prices, gasoline prices have remained relatively steady, along with demand. This challenges the notion of “history repeating.”

If the US dollar were to experience a crash, it is plausible that the price of gold would rise. This is because individuals often perceive gold as a secure investment during periods of economic uncertainty or instability. When the value of the US dollar declines, it can lead to inflation and diminish confidence in the currency, prompting a greater inclination towards gold as a store of value. Moreover, a weaker US dollar can render gold more affordable for individuals utilizing other currencies, potentially driving up demand for gold. However, it is crucial to consider that the extent to which gold prices would increase in such a scenario would depend on various factors, including the severity and duration of the crash, as well as other economic and global developments.

By Alexandre Laurent

Alexandre Laurentl is working in the jewelry and investment gold since 2002. Alexandre graduated from The Normandy School of Business and from the University of Perpignan a Bachelor of economics in 1995.

2 replies on “If the dollar crashes, what happens to gold?”

The fact that the market for gold has been hyperactive for lack of better term says it all. Precious metals will always be a safe fall back plan dictated by the history of market crashes in the past.

It is also regardless of the duration of the crash (whether short-term or long-term), gold tends to increase. In the worst stock market crashes, gold has even recorded its best performance: during the 56.8% drop in stocks over a period of 2 years in the early 2000s, gold appreciated by 25.5%. The lesson to be learned is the following: even though gold tends to decline at the beginning of a stock market crash, it does not necessarily mean that the trend will continue.

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