Today Standard & Poor’s launched its new S&P 500 Gold-Hedged Index, which is designed to grant investors exposure to the U.S. equities market while hedging the currency risk of a declining U.S. dollar.

To achieve this, S&P's new index goes long in both U.S. equities and gold. It overlays a long position in the S&P 500 with rolling one-month near-term COMEX gold futures, thus isolating equity returns from fluctuations in the U.S. dollar. The index will be rebalanced monthly.

Hedging foreign currency risk is nothing new; S&P already offers other currency-hedged indices based around the euro, yen, British pound and Canadian dollar. But the idea of U.S. investors offsetting the risk from their own currency is relatively novel.

However, even if a U.S. investor only holds domestic securities in her portfolio, she may still be vulnerable to domestic currency risk, says S&P, given that as the dollar depreciates, so too will her purchasing power. This has become especially relevant lately, as the U.S. Dollar Index, which measures the greenback's performance against a basket of international currencies, has already dropped almost 9 percent year-to-date.

Investors can offset their dollar-based currency risk through a long position in gold, whose price is not directly dictated by any given country's fiscal policy or inflation rates. Although gold generally shows little long-term correlation to U.S. equities, it does have a long-term negative correlation to the U.S. dollar, meaning that when the greenback depreciates, gold tends to rise in value.

S&P created its new gold-hedged equity index in response to the current interest surrounding gold, the company said, and as the dollar continues to fall, investors should see higher returns. In the launch announcement, S&P's Director of Strategy Indices Liz Taxin noted that "By holding long gold futures contracts, investors stand to gain when the U.S. dollar loses value as expressed in the dollar price of gold.”

According to the company's backtested data, over the past 10 years, the new gold-hedged index would have outperformed the S&P 500 by over 10 percent per annum, albeit with a higher volatility. Of course, should the dollar stage a comeback, the reverse would also be true and the index will inevitably lose ground.

But with investor confidence in the dollar still shaky, S&P isn't the only one expecting to see significant interest in the new indexing strategy. UBS, the company behind the broadly diversified futures-based DJ-UBS Commodity Index series, has already licensed the new index to develop new investment products.

You can learn more about the new index here.