When Gold Goes Up, Is It Really Gold — or Just the Dollar Going Down?
When the price of gold rises, many investors assume something fundamental has changed about gold: increased demand, a looming crisis, or market momentum. But gold doesn’t always rise because it becomes more valuable in real terms. Sometimes, the price of gold increases simply because the currency it’s measured in has weakened. This distinction — between a real change in gold’s value and a change in the value of the currency — is critical, and rooted in foundational economic theory. Yet it’s often misunderstood, even by otherwise sharp observers. ...