The precious metal and greenback go head to head for 'reserve currency' title TOKYO (MarketWatch) -- The U.S. dollar's appeal around the globe is souring and the greenback's decline is polishing the outlook for gold and raising the metal's status as a monetary asset. "Gold will likely be increasingly used as a safe-haven monetary asset to protect and bolster national currencies as it has been throughout history," said Mark O'Byrne, executive director at Gold and Silver Investments Ltd. But that's only part of the story. Gold may be, or has been, becoming somewhat of a replacement for the dollar in parts of the world, marking a partial return to its historical value. That view's made more obvious by the precious metal's often inverse relationship with the dollar. "As the dollar retreats to new lows for the year, gold approaches new highs for the year," said Peter Grant, a senior metals analyst at USAGOLD-Centennial Precious Metals. Prices for the precious metal peaked at a record $1,034 an ounce back on March 17, 2008. It dropped by as much as 32% to hit a low under $700 in November. But it's now trading around $970 an ounce -- 40% above that low. See story on silver's gains. Meanwhile, the U.S. dollar has weakened in recent months, with the dollar index (DXY 79.55, +0.13, +0.17%) , which measures the performance of the greenback against a basket of currencies, down 11% from a recent peak in March to touch a new low for the year. The dollar has fallen 14% against the euro in the last three months. "As the common currency to the world devalues, then gold by extension has to gain in value," said Marcus Hudson, president at Hudson & Associates, a commodity hedging advisory firm. And gold by extension is a "monetary phenomenon." That's not necessarily a new concept as much as it is a fresh way to look at it. "The main reason why gold has been skyrocketing is because investors are running out of places to park their money," said Kathy Lien, a currency analyst at Global Forex Trading. "The dollar's reserve status is at risk with central banks from the world talking about diversifying out of U.S. dollars," she said. And "gold offers one of the few respites from a world where fiat currencies are being crushed by quantitative easing programs." Dollar's understudy The dollar has been falling in value for a number of reasons that appear to highlight gold's potential to serve as a global reserve currency. "The U.S. dollar is the most widely circulated and used medium in the world," said Ed Bugos, director of mining finance at Strategic Metals Research and Capital. "It became the reserve currency because so many other countries left the gold standard first and began to abuse their own currencies through inflation."

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