Gold in actual fact can be easily considered as a standard of value for paper money throughout the entire planet. This is based on the simple fact that gold prices are given value in the form of U.S. dollars and taking into consideration that the price of gold is not exempted from market forces that cause it to fluctuate due to the pressures of the market place, gold still maintains its position as ‘real tangible currency’.
This scenario might raise the question in most of us with regards to what actually influences gold or other precious metals prices in the marketplace. Well, based on the fact that it is considered as ‘real currency’ one definite ‘force’ that influences gold and other precious metal price fluctuations which investors that have interest in gold understand is a global crisis.
Because the price of precious metals, especially gold and silver tend to rise when the general population on the planet lose confidence in paper currencies, financial markets and their respective governments a crisis commodity ensues which sends the prices of most commodities plunging into oblivion.
Such global based events have a tremendous impact on the value of precious metals and especially gold due to the fact that the shiny yellow metal is seen as a hedge or safety zone during economic downturns or geopolitical tumult. A simple example can be observed from when Russia moved into Crimea and during the annexation the price of gold spiked because general populations basically became uncertain about what was going to happen to the region in terms of geopolitical stability.
However, this is always not the case as in certain situations military action could actually advocate reassurance with regards to geopolitical situations and soften the prices of gold as it happened at the beginning of the Gulf War. Basically what this says is that political chaos supports the shift of focus or interest in gold because of its ability to maintain purchasing power.
Another common factor that is given by most people in general for holding gold is as effective protection against inflation, hyper inflation and even currency devaluation. Everybody has become aware of the fact that the values of currency tend to fluctuate, but the value of gold on the other hand tend to remain stable in a sense that an ounce of gold can buy the same items now as it will be able to buy 10 years down the road, it may even be able to buy much more.
This is simply because gold is known to retain value outside the world of politics and is valued by everybody, everywhere on the planet and as a low-risk, solid investment for gold buyers in a boiling hot pot of currencies that are becoming senseless to their own existence investors are generally becoming more encouraged to buy gold as the value of paper currencies continue to decline with each passing year.
Therefore, the perception that people have about gold offering safety is actually based on proven theories related to economics.