The policies of President Reagan led to the strong dollar decades. Did that lead to a mass sell-off of dollars? Of course not. People are unwilling to sell things that they believe are going to increase in value.
It was only when the value of the dollar came into question at the turn of the 21st century that they began to be sold. At that time, an ounce of Gold would buy 270 dollars. For a brief period, the dollar rallied, then its value declined sharply. By August 2012, the same ounce would buy 1794 dollars.
At that point, dollar demand grew again. Sane people breathed a sigh of relief.
People sell their dollars when they think that the trend is down and buy when they think that the trend is up. The most novice of investors would understand that strategy.
The person who believes that they are ‘buying Gold’, is overlooking the first step of their thinking. What made them want to ‘buy Gold’? It is always and invariably because they believe that the dollar (or their local currency) is weakening, or is about to. The reality is that they are selling dollars, but they are so used to thinking of dollars as money that they cannot adjust their thinking to accord with their logic. It’s monetary Stockholm syndrome.
Gold is never bought or sold; either in theory or practice. It is always the variable value, the currencies, that are bought and sold. The measure of the transaction is the invariable value – Gold.
After seventeen years of watching people glaze over trying to understand this, I know that these words will not penetrate. But still I try – always the optimist. The irony is, that while they claim to not understand the theory, they conform to it in practice.
Philip Barton January 2017