NEW YORK (MarketWatch) — Gold is an investment in search of a story — or at least one that’s true more often than not.

That’s not to say there aren’t lots of tales told around gold. One that was especially popular when the metal’s price GCM23, was barreling toward a record high of $1,911 a troy ounce in August 2011 was that it had become a de facto currency.

Gold bugs spun that yarn on the notion that paper currencies — especially the dollar — were having their value destroyed by reckless, money-printing central banks. We had reached a long-overdue moment, they told us, in which gold is recognized as the only reliable store of value with which to protect future purchasing power.

The story was told relentlessly in ads narrated by stern-faced people on television channels whose viewership tended toward an older, more conservative demographic. And for many it stuck. Tens of thousands poured their money into gold coins, gold bullion and gold-based exchange-traded funds.

Many of those people are still buying that story, but at the cost of a 25% loss from that 2011 peak.

The fact is gold has been a terrible hedge against the dollar, even though as a commodity denominated in greenbacks its price should rise, all things being equal, when the dollar falls and do the converse when it ascends.

Even if we resorted to a bearish case for the gold-as-currency story, pointing to how the metal’s sharp decline from $1,800 in October last year to below $1,400 this month has coincided with a rebound in the dollar, our argument wouldn’t survive closer scrutiny.

Sure, the 30-day average correlation coefficient between the near-term gold contract and the trade-weighted ICE dollar index DXY, -0.09% got as low as -0.92 in March, close enough to a perfectly negative -1.0 reading to suggest a tight inverse relationship. But you only have to go back to January to find the relationship at a 0.76, close to a perfectly positive correlation of 1.0. In fact, for years gold and the dollar have flipped back and forth from periods where they walked in tandem to those where they went their separate ways. Such inconsistency makes for the worst kind of hedge.

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A key problem for the gold bugs is that far too few people buy their story. Until gold is widely accepted as legal tender, the broader investing public simply won’t treat it as a currency.

One big mark against the metal is that gold holdings do not pay interest as paper-currency-denominated deposits do. That too stems from the fact that virtually no one accepts gold as a medium of exchange. Since you can’t buy a house with gold, there’s no motive for banks to intermediate between gold savers and gold borrowers, which means there’s no interest rate market for gold lending.

And without those rates, there’s no forward market with which to gauge the comparative returns on gold versus different currencies over time, no way to speculate on their differing outlooks, and no reason to trade it in the foreign-exchange market.

Plenty of people have articulated plenty of good reasons to mistrust “quantitative easing,” but that’s not the same as saying they fundamentally mistrust the currencies issued by the Federal Reserve, the Bank of Japan and other practitioners of this controversial monetary stimulus strategy.

And because faith in an underlying currency is inherently attached to the government that issues it, investors naturally see the Australian dollar as a bet on Australia AUDUSD, +0.05% , the Thai baht USDTHB, -0.16% as a bet on Thailand, the South African rand USDZAR, +0.14% as a bet on South Africa and so forth.

By contrast, what exactly does a bet on gold represent?

Betting on a summer rally

For sure, gold’s historical antecedents run deep — wars have been fought over it, colonial conquests launched in its name. But beyond demand for jewelry and the occasional industrial use, these days the fundamental value of the metal seems dubious to most of us. It’s not enough to declare that gold is money because, well, it just is.

I don’t want to deny that gold has historically done reasonably well as a hedge against inflation.

But the rationale for that is similarly challenged by fundamental questions. A much more effective hedge against inflation is one that’s deliberately designed to pay higher returns when price indexes rise, such as the U.S. Treasury’s inflation-protected securities US:912828JX9 . The only reason why you’d prefer gold over these so-called TIPS is if you had no confidence in the dollar itself. And that just takes us back to square one.

If the global financial system again veers toward total meltdown, or if inflation is finally brought back to life, buyers will certainly return to the timeless allure of gold. But that moment too will likely prove fleeting.

Heed the warning of the last six months. Question the stories.