The relationship between gold and the US dollar can be a bit complicated, so here it is in simple terms:
First, it's important to understand that gold is a valuable metal (no shit). But, that is not the main reason people often invest in it. Gold is considered a "safe asset" meaning it can hold its relative value over time. The reason why? You can't print Gold.
Paper currencies on the other hand can be devalued when printed too much. Pretty elementary stuff, bare with me. This is why investors view gold as a "hedge" against the US dollar - if you own gold you own wealth, same as the past thousand years. The dollar technically could lose all its value and you'd be broke (this won't happen just an example)
Right you may be asking yourself.. There's no way we go back to paying for a cup of coffee with a couple gold flakes. Yup, of course we won't. That's why instead you can think of Gold as a placeholder currency. Eventually, the investor will bring their money out of gold. Okay, so why then is Gold is doing great and the US dollar.. Not so much.
Alright so are people really losing that much faith in the dollar after a couple rough weeks?
Yes & No: On one hand the Banking system is having the worst two month in decades and there are very legitimate concerns. People are flooding to gold because there are some worries. But to an all-time high price? This would suggest that we have the all-time worst confidence in the US dollar. To this I would say we need to look at the other potential lurking forces around who might seem to benefit off a change of the guard in the reserve currency..
So wtf is a Reserve Currency: Fair question, short answer - The reserve currency is the currency that is held in the largest amounts by governments and central banks around the world. Specifically used for international transactions and to support their own currencies. Since the end of World War II, the US dollar has been the most widely held currency in the world. Giving the US a number of economic advantages, like borrowing at lower interest rates, conducting trade easier, influencing global financial institutions, and using economic sanctions on enemies. It also gives the US the ability to fund its military through US Treasury bonds, which are high in demand due to the US dollar being the reserve for everyone.
If you are confused just think of it like this, if you are the country with the reserve currency you are basically using cheat codes. When you talk, everyone listens. Or in our case when you babble (shout-out Sleepy), people attempt to listen. They have to, their economy is semi-built around it.
Alright so back to Gold: We know gold and the US dollar are a see-saw, one goes up the other down. In other words when Gold goes up it signals a global worry toward toward the US dollar which is the reserve currency. We also know that having the reserve currency is quote-on-quote a cheat-code. And, lastly that other power players on the global economical scale suffer the most at the whim of the reserve currency from things like economic sanctions. So what the hell is happening with Gold? Is anyone in the shadows pushing it up?All-time highs???
I'll just leave this here and you can decide for yourself:
The World Gold Council points the reasoning of record highs being the removal of Covid lockdowns in China leading to citizens rushing to buy jewelry, bars, & coins for three months after a release in Beijing.
China & the Chinese Yuan announce becoming the De Facto Currency of Russia, China's central bank authorized ICBC as a yuan clearing bank in Brazil, and Saudi Arabia announces a new oil facility using the Chinese Yuan worth 12.2 Billion...