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The inverse relationship between Gold and the US dollar (The Message) - Alldamoney

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The inverse relationship between Gold and the US dollar (The Message)


The US dollar is a widely accepted global currency of exchange  and majority of banks both central  and private invest their funds in the US dollars. While GOLD is a precious metal with a long history of being used as a currency, safe haven for investors and a means for central banks to preserve their assets during volatile economic conditions. Macro conditions in the economy over the years formed an intrinsic co-relation between gold prices and the US dollar. Banks and investors globally move their funds to gold when there is a decrease in demand for the US dollar so as to hedge and protect themselves over economic uncertainty. This move will increase the demand for gold and the price would therefore increase. Also when the value of the US dollar rises, investors would most likely shift their investments from gold to the US dollar. This move will cause the value of gold to fall as demand falls. Therefore investors behavior creates an inverse relationship between gold and the US dollar per say.


PPPRECIOUS METAL
DATE AND    TIME e and Time
LAST BID ad)
pCha Change due to Weakening of USD nge due to Weakening of USD
Change due to normal trading to Change due to
Normal Trading
Total Change Total Change
05/16/2016 13:49
1273.30
+0.50+0.04%
0.000.00%
+0.50+0.04%
05/16/2016 13:48
17.13
+0.01+0.04%
+0.04+0.25%
+0.05+0.29%
05/16/2016 13:46
1048.00
+0.40+0.04%
-1.40-0.14%
-1.00-0.10%
05/16/2016 13:35
588.00
+0.20+0.04%
-3.20-0.55%
-3.00-0.51%


Finally, it’s important to note that both the U.S. dollar and gold price can increase at the same time. This could be due to some crisis in other countries. That would make investors move their funds to U.S dollars dominated assets considered safe. This move will increase the value of the dollars. Other factors like monetary policy, interest rate and inflation of other countries versus the U.S can contribute to the rise of either Gold or the U.S dollars.

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