The relationship in value between gold and currencies has diminished significantly since the gold standard was abandoned in the early 1970s. During that time, the president of the United States Richard Nixon also barred the exchangeability of the dollar into the precious metal, which brought an end to the Bretton Woods system.
The In Gold We Trust Report highlights that in the past four decades, the purchasing power of some of the most popular currencies on the globe has diminished significantly against gold. The global monetary system was severely impacted in the first decade after the gold standard was abandoned. High price inflation, international conflicts and a couple of recessions in the United States put the U.S. dollar under a lot of pressure.
The price of gold increased by 65% during the 1973–1974 oil crisis. A few years later in 1978, U.S. bonds had to be issued in the hard currencies of the German mark and the Swiss franc.
The next ten years after this period saw the world’s reserve currency being rehabilitated through a restrictive monetary policy run by the U.S. Federal Reserve, which saw the dollar accrue extremely high interest rates. This trend carried on even after the fall of the communist bloc in the early 1990s.
Despite this, gold is still regarded as the universal reserve asset that private individuals, investors and central banks turn to in times of crisis. For instance, the uncertainty brought on by the 2020 coronavirus pandemic saw investors increase their exposure to gold, with figures showing that in August 2020, the price of the precious metal recorded a new high, exceeding $2,000 per pound.
The role of gold as an anchor during times of turmoil will always remain, as long as economic and political tensions endure. The average annual growth rate of the price of this precious metal in U.S. dollars since its convertibility was suspended is roughly 10%. In addition, since the euro’s introduction to the market in the late ’90s, the price of gold in euros has increased by an average of nearly 8% annually, which equates to about 356% cumulatively.
With this in mind, it shouldn’t come as a surprise that the best performing currency in the last four decades is the Swiss franc, mainly because of its close relationship with the precious metal. The Swiss National Bank has one of the biggest gold reserves on the globe.
Reports have also shown that gold outperformed almost every currency and nearly every asset class in the 2001–2019 period. It is therefore not surprising that companies such as Asia Broadband Inc. (OTC: AABB), which focus on precious metals, are continuing to thrive year after year despite the upheavals that economies face from time to time. Gold is timeless.
NOTE TO INVESTORS: The latest news and updates relating to Asia Broadband Inc. (OTC: AABB) are available in the company’s newsroom at https://ibn.fm/AABB
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