By Daniel Shaw
One of the most important ways to save humanity in extreme situations is a stable economy, which helps to eliminate hunger, protect people and cope with disasters. But money is not very resistant to all kinds of changes. It is related to the market system that allows them to drop or increase in price.
Sometimes we notice that prices for different products rise from time to time. The reason is not because they become more expensive, it is because the money itself worth less. An economy where money supply is not tired to gold, faces inflation. If the currency of the country is pegged to the gold stocks so the crisis is virtually invisible and the national currency is stable to fluctuations.
Looking at the prices on gold during the last years you can see that they are changing all the time. Though it is not the price of gold that is changing, it is the price of money against gold moves up and down. Virtually the gold price remains stable for many centuries though the quantity of money you need to buy gold changes from time to time.
Historically it started a long time ago when gold was used as money. The money was made of gold and other precious metals like silver. But it was a time of completely different money and economy. With the development of civilization, the world’s economy and money has changed too, though the gold value still stayed the same.
You may ask why there are so many cases of countries bankruptcy, inflation and economical crisis if the quantity of existing money is equal to the gold. The reason is that the world economists wish to raise the value of the money and the ways they used to do so cause all kinds of economical disasters where common people suffer. Instead of stabilizing the economic situation of the country by increasing the gold stocks, economists choose the path of inflation releasing more money. As a result all becomes expensive and people don’t have enough money to buy things. Money depreciates more and more and all this leads to poverty and chaos.
Currently there is so much money in the world, that it is impossible to equate it to the rate of gold, because it would increase the price of gold in a million times. For that reason such actions as inflation is necessary to do in order to keep the stability of the world economy.
The appearance of electronic money changed the situation. Banks have a lot of virtual accounts that are not secured by any gold reserve. So we can say that the present price of gold has being deliberately significantly diminished.
Gold is one of the most traded commodities in Forex market. Silver and Oil are popular too but their volumes are much lower. There are also many other commodities like Platinum, Rice, etc offered for trading by many brokers. Trading commodities is much different than currencies. Commodities market is more volatile and usually has higher spreads that requires any trader be more careful in building his trading strategy.
Daniel Shaw is a Forex Trading professional. Visit his site Singapore FX to get more useful information and tips on how to trade Forex in Singapore.