50 years since the detachment from gold

A few days ago, it was exactly 50 years ago that gold was decoupled from the dollar. 15 August 1971 was the day President Nixon announced that the dollar could no longer be exchanged for gold. Previously, in fact, that was still the case.
Since 1944, the US dollar could be exchanged for gold. This was also called the Bretton Woods system. 44 countries agreed that the dollar could be exchanged for gold at the bank. 
 

Bretton Woods

Since 1944, the US dollar could be exchanged for gold. This was also called the Bretton Woods system. 44 countries agreed through that agreement the US dollar could be exchanged for a certain amount of gold at the US Central Bank. The exchange rate stood at $35 per troy ounce of gold. This applied only to dollars. Other currencies were linked to the US dollar via a fixed exchange rate, but could not be exchanged directly for gold. 
 

The decoupling of the gold standard

However, confidence in the dollar declined because of inflation. The US gold supply still covered only a fifth of all US dollars in circulation. This was largely because other countries wanted to exchange their dollars en masse for gold. Several countries also left the Bretton Woods system and, as a result, their economies improved. For this reason, President Nixon had to cut a knot. He gathered his advisers and made a decision. The gold standard was loosened. This was also known as the Nixon shock. Another motivation behind the removal of the gold standard was the upcoming re-election. Namely, he wanted to boost the US economy in order to get re-elected as a result. 
 
At the time, the US dollar was the only currency pegged to gold and failed to hold up. Nixon called it one of the most important decisions in economic history. Originally, he once planned to return the peg to gold. However, nothing ever came of this. In fact, many countries had tasted a free exchange rate against the dollar and could now print money when needed. This pleased them. At 50 years, the US dollar is the currency that has nevertheless lasted the longest. A lot has happened in recent years and the corona crisis has not necessarily been a positive driver in this. Meanwhile, in fact, inflation is rising. 
 

Uncertainty

After decoupling from gold, the United States implemented stimulative fiscal policy. However, this is not desirable after a currency is devaluing. The result was high inflation, budget deficits and increasing sovereign debt. This was not positive and created uncertainty. There is a lot of money in circulation and during the corona crisis this only increased. The resulting inflation and uncertainty do not help. There are also doubts about the future value of money. This is because the purchasing power of money is declining. Gold, on the other hand, is stable in value and offers security. 
 
It is seen as a so-called safe haven. This is because where money becomes worth less, gold moves with inflation, as well as deflation. This ensures that your money does not become worth less. Gold is available in different forms, namely coins and bars. This way, gold can be bought with different budgets and in different denominations. At The Silver Mountain, you can buy gold of excellent quality. In this way, you could hedge against current and future uncertainties, as well as inflation. 
 
Disclaimer: The Silver Mountain does not provide investment advice and therefore this article should not be considered as such. Past results do not guarantee future results.