The Relationship Between the Dollar Value and Gold Price

An individual, who is aware of the ongoing trade of US$ gold price and the Dollar Index, would definitely be aware of their being opposite each other in directions.

The basic reason for gold and dollar being in complete opposition is that gold is more of a currency. It is being traded in the global market as money, and because of this very reason, dollar happens to lose its value on the foreign exchange market over a prolonged duration. During the same period, gold price is expected to gain a rise. At this point, the fact cannot be overlooked that when ever dollar gains back its value, even if after a lot of months, price of gold is going to decline.

Whenever the charts or the graph of dollar and gold are compared, the vast difference becomes clear along with the fact that both of them have been inversely correlated ever since the currency system came into being around the early 1970s.

Gold is generally perceived as a long-term hedge against inflation. It would not be very long that periods of uncertainty would instigate an increase in the price of precious metals. There is an inverse link between the precious Metal Price Index and the US Dollar Index. The World Gold Council has even substantiated this fact that they both share an inverse relationship.

During the recession of the US Dollar, it typically appreciates in worth and the cost of silver, platinum and palladium usually face a decline. There are periods of recessions when gold and the US Dollar appreciate together, and that helps fail the inverse relationship over the short-run. However, during the long-term, this inverse relationship does not lose its grip and the reciprocal trend continues.

Therefore, the aforementioned points indicate gold as not a long-term hedge against inflation. It very vividly puts forth the fact that gold, unlike any of its companion metals like silver, platinum and palladium, is definitely a short-term security hedge against recession and decline.

Gold definitely has an edge above the US Dollar in the global market as it tends to benefit its consumers in the long run. It is not so that it loses its value when dollar gains back its worth. Gold has an edge of benefit still left behind, and the fact remains that when gold reaches its peak, dollar is nothing more than mere piece of paper. Due to these very reasons, they both share a reciprocal relationship where either one side benefits or the other one suffers. Yet, both are the commodities that investors do not refrain from investing in.

Source by Jack Wogan

The Relationship Between the Dollar Value and Gold Price