1 Introduction of Value of FIAT currencies going down vs. gold value raising

FIAT currency is referred to as a currency that is declared by the government through the legal tenders. The legal tenders in such a context mean that the money has full backing that is provided by the government. In the previous history, FAIT currencies have had some order of raising and then sudden collapse because of devaluation. In the first step, the paper money is introduced by the creation of an economic boom. With time, however, the slow increase in inflation and losing value became dominant. The devalues is further connected with the economy. The money was introduced for the replacement of external factors in the FAIT currency. According to the statistical studies, the historical precedence show change in the holding values. The statistics show that 20 % of FAIT currency failed through hyperinflation, the war destroyed 21 %, independence destroyed 12 % monetarily reformed 24 % and circulation approaches reached 23 %. The average life expectancy for FAIT currency is measured for 27 years. In the 18^th century, France was facing issues with FAIT currency and inflation rate increased 13,000 %. Similar to the predecessor, Napoleon introduced gold franc and helped in solving the situation in France (Bordo, Dittmar, & Gavin, 2007).  

2 History of gold investment and FAIT money

Back in history, the currencies were used as physical commodities such as silver and gold. The government does not influence the supply of precious metals. In 1971, the Bretton woods agreement of U. S dollar was cancelled. The floating exchange rates were used in the monetary system. The supply is limited to the current monetary system and gold, politically is believed as to be a stored value. In other words, Gold has been used as money from past thousands of years instead of the paper currencies, gold is considered as a real commodity that cannot be printed in any form. Germans universally adopted the FAIT currency and then updated their attenuated version towards the new standard in 1971. In 1990, "The Economist" mentioned FAIT money as fun money. The best alternative at the time was to secure the money in the form of gold and silver that are hard commodities with different values for the cost holding. However, the history of FAIT money is not longer and carries no historical role. There was no contractual connection between the real economy, climate and currency type (Othman, Alhabshi, & Haron, 2019).

3           Gold investment Versus FAIT

In the most recent statistical analysis, the price of gold is touching the roof. The hovering of gold at the time of writing is near $1870 and previously it was $ 1500. Gold is considered as an investment from different perspectives. It is an investment against the dropping fact of the FIAT currencies. Gold is an investment due to the decreasing demand of the central bank. It is also an investment because there is no political risk. There is a number of factors that define gold as an investment that generates profits and benefits (Dinardirham. com, 2019).

3.1         Comparison of Gold and US dollar

When comparing through the 80s, it is observed that the value of gold is relatively more stable as compared to the USD. The decline was first observed in the late 90s and early 2000s. After 2005, it is evident that the price of gold rocketed upward and increased rapidly. the graphical representation in figure 1 shows the increasing trend of Gold investment and value from 1980 to 2010 (Othman, Alhabshi, & Haron, 2019). 

Now compare the value of gold with the USD it is observed that the value of gold is stable and on the other hands the value of USD decreased and from 2000 to onward a significant decrease in the value of gold was observed (Othman, Alhabshi, & Haron, 2019).

3.2         Gold, currency and federal fund rates

In 1971, the agreement related to gold "Bretton Woods Agreement" ended and resulted in the international convertibility of USD into gold. The previous decade determined the international convertibility, high inflation and price controls in this perspective. The increasing trend resulted in an increase in inflation and interest rates on the houses. The figure 2 defines the relation between gold, USD and federal funds rates in percentage. The graph depicts approximate fluctuation in USD and federal fund rates. Under this consideration the inflation was tamed successfully, the price of gold collapsed and resulted at the end of the millennium in the market. In 2000 and 2008 a financial imposition occurred with the subprime bubble in the market. The bubble in the price and market value was government sovereign debt bubble (Gold-eagle. com, 2003).

3.3 Gold investment and debt rates of Value of FIAT currencies going down vs. gold value raising

When considering the statistical data, it is observed that after the 1970s and in the mid of 1940s the debt rate was not significant. The influence on the investment and price of gold was due to manufacturing centre conditions and when Europe was destroyed with the embroiled dictatorship and communism. The graphical representation in figure 3 show variation in the gross debt and public debt with the consideration of debt fraction of GDP and debt fraction in millions of dollars in 2010 (Othman, Alhabshi, & Haron, 2019).

3.4 Store values of Gold versus FAIT of Value of FIAT currencies going down vs. gold value raising

Figure 4 shows the relation between the gold and collection of FAIT currencies with the baseline year as 1999 to 2011. The graph shows a comparison of gold investment with the USD, Swiss Franc and the Canadian Dollar. It is observed that none of them won the contest against gold. The worst performance is delivered by the USD from all of them (Sunshineprofits. com, 2019).

4 Purchasing power and gold of Value of FIAT currencies going down vs. gold value raising

There are two different and important factors related to the good money and these aspects include the medium of exchange and the suitability and the store of value. The value of gold in the market is affected by the national laws and the trends of the market. The FAIT investment is indisputable as it can be used for the medium of exchange. In the short term, FAIT is strong enough to hold the value but with the passage of time the value of currency decline and erode due to the central bank inflation (Bordo, Dittmar, & Gavin, 2007).

 The process of using FAIT in the investment is to develop attractive business developments that make the growth process easy and expand it. The other analysis shows that the central banks go beyond the market optimum and end up with the inflating process of the currency. The prime concern of the debtors regarding the cheaper money is to reduce the conflict of the desire of savers from the hard money and to hold it properly. It is also observed that the concept of hold hard money is reducing because of the dampening factor on demand that can be slowly started to go away from any process (Investitwisely. com, 2019). 

5 How gold investment is good of Value of FIAT currencies going down vs. gold value raising

The seasoned gold buyers are well aware of all types of profit potentials behind the precious metal known as gold. Gold investment is beneficial to safeguard the hard-earned wealth and cash can be saved as gold instead of FAIT or paper currency. Gold is far more beneficial as compared to cash when required to store wealth. The interest rates remain low if the money is stored in the bank and eventually the owner has not earned anything. When considered the account for the analysis of inflation, the cash has lost value. Gold is recognized around the world and has long term record of stability. Consider the insurance policy here, in which people store their assets and hold its value in the times of trouble. Gold is not a flat currency. The flat currencies have a direct influence in deriving the worth from issuing government. The gold assets cannot be expanded to fulfil the needs of struggling central banks. Gold is always supported due to the inherent scarcity. The purchasing power of gold as a precious metal cover a long period of time. The flat paper currencies cannot be used to store the assets. There are 13 criteria to compare the FAIT money that is defined by the government with the gold. In the case of FAIT money, there is no need for quality testing and FAIT money use the intrinsic value of the gold. The table given below contains important information related to the comparison criteria of FAIT money and Gold investment (Othman, Alhabshi, & Haron, 2019).

Table 1: comparison of FAIT money and Gold investment

6.1         Allocation of the gold is not as lent out process

One of the main cause of keeping the money in the bank is to get a higher rate of return and the interest rates. The modern finance theory, the greater risk lead to a higher return. Cash on deposits can generate the rate of return in the bank as it is lending to the bank as cash. Following the same consideration, the loan in the bank can be affected by the cash deposit and the interest rate changes. The bank develops more money that is ten times of the original with the greater deposits. Depositing the money in the banks is associated with two risks including bank creditworthiness and the bank make the decision and lend out the money (Othman, Alhabshi, & Haron, 2019).

 The more money provided to the bank the more it generates the credit risk and lent the money. The only possibility to overcome the risk is to not keep the cash in banks as deposited. The gold is not allocated in the banks and it is lent out the 3^rd party. By having a comparison, it can be concluded that allocated gold is not lent out and there is no significant risk associated with the credit. Indeed, keeping gold and allocation of gold can bear the holding charges that is the cost of keeping the gold secure (Gold-eagle. com, 2003).

6.2 Bank owns your cash of Value of FIAT currencies going down vs. gold value raising

The deposition of allocated gold in the banks is like keeping the product safe in the deposited box and one can demand the gold from the bank any time. If the cash is deposited it is not owned by the person. It is owned by the bank and in case if the bank goes to the bankruptcy then all the cash deposited in the bank by someone goes into the shared creditors.

6.3         Gold is always and all where get acceptance of Value of FIAT currencies going down vs. gold value raising

It is authenticated and verified that gold is always accepted. Gold is always used to be stored as currency and wealth from the past many years. According to Alan Greenspan in 1999,

"Gold still represents the ultimate form of payment in the world ….. Gold is always accepted."

On contrary to the present consideration, the cash is not always accepted all the ways. If one day I withdrew $ 100 in 5 then $20 is deducted from the banking machine. Gold is a currency that is accepted everywhere without any borders.

6.4 Gold is relatively scarce of Value of FIAT currencies going down vs. gold value raising

According to the Gold Fields Minerals Services (GFMS), it is estimated that the huge amount of gold such as 150, 000 tonnes of gold has ever been mined around the regions. The price of gold is like the US $ 370 per OZ and the value of the gold stock around the world is the US $ 1.7 trillion. In this context, the total cash stock in the United States is approximately US $ 1.3 trillion.

6.5         Money is printed and Gold is naturally produced

The discipline forces of gold use the production process that can be explored through the process of mining the gold bards from mountains. As compared to cash, that is printed the value of gold can vary with the value of the currency.

6.6 Gold investment is more secure of Value of FIAT currencies going down vs. gold value raising

 Most often it is observed that the investors prefer to hold gold and gold allocation is provided with the proper identification process. The production of the gold is based on the manufacturer skills, bar number, and purity. Gold is physically segregated when compared with the other gold in the value and it can be insured. While on the other hand, the cash on deposits is not possible to be physically segregated. Below is the table of allocated gold that provides all the required information (Investitwisely. com, 2019).

6.7         Gold hedging against inflation of Value of FIAT currencies going down vs. gold value raising

It is observed that investors typically prefer to purchase a large quantity of gold to induce an impact on the inflation levels of the country. The demand for gold is getting more multiple increases to reduce the inflationary time.

Table 2: Demand for gold

 7 How gold affects currencies of Value of FIAT currencies going down vs. gold value raising

Investors analyzed that gold in a country is experiencing high levels of inflation. The demand is increased for gold even with the inflationary times because of inherent value and limited supply.

7.1         Impact on import and exports of Value of FIAT currencies going down vs. gold value raising

The value of a currency in a country is greatly affected by exports and imports. If the country is exporting gold and also have significant gold reserves, it means that there will be an increase in the strength of the currency even with the increase in gold prices. Conversely, if a country imports a large quantity of gold it will result in weakening of currency with a rise in the gold price (Othman, Alhabshi, & Haron, 2019).

7.2         Gold investment and decrease in FAIT currency

In case, if the central bank implement strategy of purchasing gold it can induce impact on the equilibrium of supply and demand regarding the domestic currency and can increase the rate of inflation. It is observed that the bank relies on the printing of cash instead of more money to purchase gold. This can affect the excess supply of the FAIT currency.

8  Conclusion of Value of FIAT currencies going down vs. gold value raising

Very often, mistakenly, customers use gold as a definitive proxy that can value the currency of a country. Undoubtedly, there is a direct relation between the value of a FIAT currency and gold prices. The relation is not always inverse but reflects the price of gold and local currency ratio. Gold induce profound relation and impact on the value of currencies in the world. Even in the case of changing the gold standard and commodity. It can be used to improve the process and to substitute the FIAT currencies. The effective hedge is against inflation, it can play a role in an integral part of the foreign exchange market.

9  References of Value of FIAT currencies going down vs. gold value raising

Bordo, M. D., Dittmar, R. D., & Gavin, W. (2007). Gold, Fiat Money, and Price Stability. Topics in Macroeconomics, 7(1), 1525-1525.

Dinardirham. com. (2019). The Rise And Fall Of Fiat Currencies. Retrieved from www.dinardirham.com: https://www.dinardirham.com/the-rise-and-fall-of-fiat-currencies/

Gold-eagle. com. (2003). Why gold is better than cash. Retrieved from www.gold-eagle.com: https://www.gold-eagle.com/article/why-gold-better-cash

Investitwisely. com. (2019). Gold Versus Fiat and the Mother of All Bubbles. Retrieved from www.investitwisely.com: http://www.investitwisely.com/gold-versus-fiat-and-the-mother-of-all-bubbles/

Othman, A. H., Alhabshi, S. M., & Haron, R. (2019). Crypto-currencies, Fiat Money or Gold Standard; An Empirical Evidence from Volatility Structure Analysis Using News Impact Curve. International Journal of Monetary Economics and Finance, 12(2), 01-10.

Sunshineprofits. com. (2019). Precious metals investment terms A to Z. Retrieved from www.sunshineprofits.com: https://www.sunshineprofits.com/gold-silver/dictionary/gold-fiat-money/