"Interesting article that you posted today on national gold reserve holdings and the linked list. Is there a correlation between a nation's gold holdings as a percentage of national forex reserves and the strength of its currency? Japan with its super-strong Yen holds 3% in gold while South Korea ranks 60th with a mere 0.2% in gold. Its currency has also been notably weak, especially Vis-a-Vis the Yen, much to Japan's discomfort. Perhaps one should be looking at national gold holdings when trading forex."

David Fuller's view Interesting question but I think not. Trust in gold has developed over many centuries and can be attributed to its undeniable reliability as a long-term store of value, second to none. In contrast, the entire history of fiat currencies has been marked by their failure to protect purchasing power over the longer term. The temporary exceptions have occurred mainly when fiat currencies were pegged to gold or short-term interest rates were very high, but no country has been willing or able to sustain this discipline. Today, no country is on a gold standard.

Fiat currencies fluctuate against each other with most forex traders taking their cue from relative price action, hoping to ride the temporary momentum moves. Some people thought that the Swiss franc was almost as good as gold, until the Swiss National Bank pegged its currency to the euro a few months ago. The USA has the biggest gold reserves but when President Nixon scrapped the Bretton Woods Agreement (a partial gold standard) in 1971, the window by which other countries could swap their excess dollars for gold was closed.