The UK was dominant in the 19th (and earlier) century, Pound (gold Sovereigns etc.) used as the primary international trade settlement currency/system, which had knock on benefits such London being the dominant place to manage law, accounting, finance. That was destroyed, literally blown away, by WW1, Subsequently the US (US Dollar) has risen to take over that role.
Primary to being and remaining dominant is to have a massive military might, and are able to fend off financial system attacks such as what George Soros performed upon the UK in late 1992.
Some back of napkin figures
1 ton = 29167 troy ounces
The US Treasury (supposedly) has 8000 tons of gold that it compulsory purchased in 1933 locked away in the likes of Fort Knox and elsewhere. The UK (remnants from when it was the primary central law/accounting/finance hub) has 400,000 gold bars of mostly other countries gold (average 400 toz/bar). The US/UK 'special relations' is a combo that is the backbone of the US dollars dominance (primary international trade currency).
Originally the US Fed printed dollars to buy up (compulsory purchase) US gold, since then that gold was transferred over to the US Treasury in exchange for non redeemable gold certificates at $42.42/oz, the Fed became the Custodian for the US Treasury's gold, where it had the power to use the gold in support of the dollar.
In London you could buy 1000 tons of gold today (more strictly ... during business hours) that's cash settled, banks/market maker would just magic a gold contract out of thin air where the parties agreed to settle the Options/Future expiry amount/difference in cash. Recently the ratio is around 132 to 1 paper gold to physical gold (a ratio value/amount that zigzags around over time)
https://usdebtclock.org/gold-precious-metals.htmlSum up that the Fed has recent gold price / 42.42 per ounce leverage, and that the market recently has 132 times more paper gold than physical gold leverage factor ... and I make that around a 10 quadrillion US dollars potential value. More than enough to cover the cost/price of global land, businesses, bonds, cash, stocks ...etc. And more than enough for the Fed to fend off George Soros style attacks. The dollar is in effect still backed by gold and somewhat aligned to the price of gold, but in a more dynamic/variable manner. Even under the British gold standard the fixed price of gold peg had to be revised at times, under the US that variability is more dynamic - glide paths rather than distinct large periodic steps. Rather than the Dollar being fixed to gold, the price of gold is adjusted into alignment with the Dollar. So yes manipulated, but in a manner that supports/sustains the system, without which would be inclined to lead to financial collapse/disorder.
As individual investors holding some of both fiat currency (US dollars) and non-fiat commodity currency (gold) is a reasonable choice. Both will wax and wane over time and a combo of the two has a smoother middle road average rather than the more extremes that either alone may transition through at times. 50/50 US Dollars/Gold for British investors pretty much wiped out broad historic UK inflation. 50/50 in gold and US dollars invested in US stocks and that negated the US debt expansion rate (i.e. under fiat, money = debt), where that debt has risen at around a 8% or 9%/year annualised rate. In effect 50/50 US stocks/gold transitions money from being debt (that the Fed can just print out of thin air) to being tangible assets based (businesses/gold physical elements).
Inflation had tended to rise slower than debt expansion. Money as debt + interest (fiat created out of thin air, destroyed once the debt + interest has been repaid) has risen faster/more than CPI as CPI is slowed by productivity, such as a single farmer in a machine doing the former work of many farm workers harvesting crops manually.
Only those that don't understand the basics of 'the system' tend to claim it as being "manipulated", those that do appreciate/understand the fundamentals apply that to their benefit. Gold is (broadly) better than bonds (Gilts/Treasurys), as Treasurys are just debt (borrowing by the state) when it has no real need to borrow as it can just print/spend. Why would you borrow if you had a (legal) money printing press at home?
How much gold is reasonable/appropriate? Well stocks are broadly 1.5x leveraged instruments, many stocks also issue corporate bonds, to around 50% of book value (1.5x leverage factor). Leverage only (again all broadly speaking) doesn't scale up rewards, it just scales up volatility. Take the longer term yearly measures of a 3x stock fund and you'll measure something like that having 3 times the volatility (standard deviation) in yearly average gains, twice the yearly average value, that compounds to a similar annualised rate of return as the non-leveraged. Maybe something of the order of 1x having a 11% yearly average with a 18% standard deviation that compounds to a 9.5% CAGR (actual annualised investment reward), compared to twice the yearly average (22%) with three times the volatility (54% stdev) that compounds to a 9.4% annualised (actual reward). Higher volatility also means more extremes in the likes of 30 year SWR measures, higher best cases, worst lower cases. Generally its better to deleverage leveraged positions, a third in 3x, or in the case of stocks 67/33 instead of 100% stock.
Rather than buying stock, along with some bonds, that has overall exposure of stocks that issue bonds and where you in effect also buy those bonds, 67/33 stock/gold in effect is long stock, short bonds, long gold. Bonds have a broad 0% real expectancy (the state can print/spend so has no need to borrow, which is further reflected in HMRC not bothering to collect capital gains taxes on Gilts as that's zero sum and collecting taxes would be a overall negative (cost)).
Comparing 67/33 stock/gold (US data) to just stocks alone
https://www.portfoliovisualizer.com/bac ... Tvkow2jOKy and since 1972 both have yielded a 10.9% annualised rate of return, but where the 67/33 did so in a more consistent manner, less volatility, which also reflects into the likes of less 30 year SWR measures (better worst case SWR).
What about rebalancing? Well again broadly it makes no difference (but does tend to be different according to which start/end dates you actually measure across). 50/50 initial non rebalanced might end up with 80/20 in the best/worst performing assets, similar to if you'd time averaged 65/35 in the best/worst. 50/50 yearly rebalanced might achieve the same rewards, but where it maintained more constant 50/50 weightings.
The critical point in time for many investors is not during the accumulation phase, average into stocks over many years, nor in later retirement years (time averaging out) when a former 'large enough to retire' portfolio value may have supported spending as well as grown in real terms, rather its the earlier years of transitioning from accumulation into retirement. A bad sequence of returns in early retirement, portfolio value declines when you're also drawing income, can be destructive, erode base capital value down to critically low (unsustainable) levels. If at the point of transition into retirement you opened a low cost brokerage account such as iWeb, loaded half into something like FCIT (global stock fund), half into gold, and thereafter just spent each month using credit cards and sold off some of either FCIT or gold, whichever was the higher value of the two at the time to pay off the credit card bills, then that is enough rebalancing in itself. Just left as-is and more often after 20, 30, whatever years time likely the stock value will have risen to dominate the portfolio, may even be up at 90% weighting, so as though you'd time averaged 70/30 stock/gold. But where if a bad sequence of returns risk did present in earlier years then the gold 'hedge' element would kick in, have you more likely spending gold in earlier retirement years, leaving stocks that had declined as-is and accumulating, until such times that stocks might later recover/rebound to take over supporting retirement income/withdrawals.
My general advice would be to accumulate equities in early/younger years, start by buying a house using a mortgage (leverage). Later add stocks to that - a broad set such as a major index or global stock fund. At retirement turn defensive (stock/gold) in earlier retirement years, with a simple enough portfolio that heirs/partners could easily manage if/when you die. Strive to keep costs and taxes low.
