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Topic-Gold stocks and index performance comparison - Research Paper Example
Finance & Accounting
Pages 3 (753 words)
Gold stocks and index performance comparison Name: Number: Course: Lecturer: Date: Gold stocks and index performance comparison Gold for ages has been the only reserve means by central banks that is universally accepted and held in place of formal country’s currency…
When a country’s currency devalues significantly, gold held by central banks and Federal Reserve can be used in trade as a means of exchange to facilitate trade. For governments to hedge against instability in currency, gold is deposited in reserve by governments, private individual and companies to be exchange when need arises. A country’s development is pegged on the amount of gold in its reserves and is used to determine the value of a country’s currency. With a good reserve of gold, economic stability is realized alongside stable commodity prices in a country (World Gold Council). The United States ties its dollar on the price of gold and gold in its reserves which in turn the international community tie their currency against the value of the US Dollar. This explains the reason why the dollar is the widely accepted means of foreign exchange against all currencies in the world. Before 1971, gold was the only exchange standard. Since then, international cooperative monetary system has been used. Instead, it has remained trading in the international markets freely, with forces of demand and supply determining its mean price just like any other commodities. Though it has been replaced by international monetary system, gold still enjoys about 13% official reserves around the world as a cornerstone reserve asset. ...
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