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Panda

Lets hope it doesn't turn into a stampede to get out of the $US. Panic selling could cause a lot of instability in world trade, at least in the short term. But I am sure common sense will prevail as the $US does have a real value backed by the production of tradable goods and services, -- just that it is somewhere below where it is right now. Probably about 25% less is my guess.

Still, if all that money goes out of $USs, -- where is it going to go?
A lot of people are calling the stock market resurgence a stimulus induced bubble at the moment, so I doubt much of the money will be going there.
The Euro is the second biggest trading currency in the world after the $US hegemony. But if the money goes into Euros it will kill EU exports and put them in the same sort of fix as USA is now. So I doubt the money will go there either.

In the absence of some form of viable and stable trading currency I believe a lot of money will go into gold simply as a temporary hedge while the world sorts out the problem. Gold isn't going to replace the $US or the Euro as the worlds trading currency simply because there isn't enough of the stuff to go around at todays prices. If gold were to become the worlds trading currency its value would have to rise to somewhere around $US 25,000 an oz to fill the void. And thats not going to happen because it would throw the world distribution of reserve wealth into chaos.

My prediction for the future, (and its only a guess which everyone on these kinds of forums is entitled to), is that the $US will continue its slide of the past several years, all be it in a more accelerated fashion, while gold will continue its "real" rise in value against world currencies until the $US stabilizes at about 25 to 30% below where it is now. Its taken 7 years for the $US to drop 20% against a basket of international currencies as shown in the "FX US Dollar Index"
US Dollar Index
But, due to the US governments spend, borrow and print policy, it may take only another year or two for it to drop another 30%.

Time is running out for the $US hegemony and the Euro is no alternative. Money is going into gold as a hedge only as gold is no alternative either.
It wouldn't surprise me to see gold go to $US 2,000 or even $US 3,000 in the transitional period before the world gets its act together and formulates a more sustainable world productivity based trading currency. And its very likely that gold, because of its scarcity will be part of that new world currency, as will the $US.

If I was a big time investor I would be putting my money into gold right now and getting out of $USs. But as soon as it looked like there was some agreement on a new world trading currency and the $US has dropped 20%, I would be cashing my gold in for US paper money again.

I am sure gold will peak somewhere and probably suffer rapid decline when a more stable world trading currency is decided upon. But as a finite precious metal and a traditional store of wealth, I am also sure gold will be incorporated into a new world trading currency and therefore always be a more stable investment than paper money of just one country. Hell, gold as a trading currency and a store of wealth has been around for thousands of years, the $US hegemony has only been going for 38 years and its already falling apart.