What is The Relationship Between The Price of Gold And The Us Dollar
Gold Prices: Gold Prices Have Reached Record Levels. 10 Grams Of Gold Reached Rs.60 Thousand For The First Time. There Are Chances Of More Increase In The Coming Days. Experts Suggest That The Main Reason For This Is The Falling US Dollar. How Can Gold Rise If The Dollar Falls? What Is The Relationship Between Gold Prices And The US Dollar? Let’s Try To Understand The Changes in Prices.
Gold Prices Are Currently Reaching Record Levels. The Global Gold Market Is Volatile. Prices Change Daily. Fluctuations in The US Dollar Are One Of The Main Factors That Determine Gold Prices In International Markets. The US Bank Failure And The Prospect Of The Fed Postponing Interest Rate Hikes Are Pushing The Dollar Further Lower. The Dollar Has Been Depreciating Since October Last Year. Experts Say That Gold Rates Are Increasing Mainly Because The Dollar Is Falling.
What is The Relationship Between Gold And The Dollar?
The American Dollar is The Reserve Currency. Volatility In The Dollar Against Other Countries’ Currencies Drives Investors More Towards Gold. History Has Proven That Gold Gives Good Returns in The Long Run. During 1944 Bretton Woods Agreement Was Signed Between 44 Countries. According To This Agreement, International Trading Should Be Done In US Dollar. That Means Exports And Imports Have To Be Managed. Through The International Monetary Fund (IMF) Any Country Gives Up All Its Dollars And Takes An Equivalent Value Of Gold. Then The Currency Becomes Gold. In This Order, The US Dollar Became The Reserve Currency.
Gold is Usually Denominated in US dollars. That is Why Gold Prices Mainly Depend On The Value Of The Dollar. Also Other Factors That Affect These Two Include Interest Rates, Inflation, Monetary Policy, Supply And Demand. Additionally, Due To Investor Sentiment And Economic Factors, Gold And Dollar Prices Are Often at Odds With Each Other. Gold Is Very Valuable In Other Countries’ Currencies Compared To The Dollar. Few People Are Interested In Buying A Product If Its Price Is High. In Other Words Demand Will Decrease. On The Contrary, When The Value Of The US Dollar Is Low, Other Currencies Become Cheaper. This Will Increase The Demand. Then Gold Prices Will Rise.
Dollar Strength Depends On Interest Rates. In View Of The Current Banking Crisis in The US, The Fed May Not Raise Interest Rates. That is Likely To Further Weaken The US Dollar. With This, Bond Yields And Dollar Index Are Likely To Fall Further. In This Order, There Are Chances That Investors Will Be Inclined To Invest In Gold. Then The Demand For Gold Will Increase. This Will Increase The Prices. If The Value Of The Dollar Increases. Investors Will Invest In Bond Yields And Dollar Indices From Gold. Then The Value Of Gold Will Decrease.
