The price of gold, stock and oil prices, and the U. S. dollar all have very similar characteristics when comparing asset price inflations and momentum. The price of gold can affect the global market at various levels including the cost of oil and the world economy as a whole. It is still the world’s most valued commodities and the most important component of the global economy since 1945. Investing in gold and trading gold offers investors the same value, as the price of gold does not depreciate.
Some of the factors that may affect the price of gold include:
A recession – If the price of gold increases, this typically signals that the economy of the United States is struggling, and the dollar is probably weak. Inflation rates – If inflation rates increase, then typically the price of gold trading and investment increases. Low-interest rates – Low-interest rates over an extended period of time normally affect the price of gold and increase its value and price at that time. A strengthened dollar – In turn, if the dollar is particularly strong this decreases the price of gold The global economy
Gold and the U. S. dollar are very tightly linked. When one is strong, the other weakens in value. This affects the global economy. For instance, if the dollar is weak against the Japanese yen, the dollar is exchanged for a smaller amount of yen than in the past. As the dollar continues to weaken against foreign currencies, investors start to look for alternatives to investing in the dollar and turn to investing and trading in gold instead. This increased demand for gold causes the price of gold to inflate, as investors want a tangible asset that will hold its value.
This post was published at ZenTrader on Oct 30, 2015.