The dependence of the dollar from the value of gold

Gold at all times was recognized as a valuable metal, but also was a guarantor for many currencies. And the price of this metal forms the cost, including the dollar. In conditions of increasing crisis the investments in the precious metals market have a special meaning. Therefore a trader has to consider how gold affects the chosen currency.

What affects the price of the precious metal?

News with financial connotation, one way or another, contribute to the change in the price of the yellow metal. Despite the fact that the US is the largest gold miner, overtaking on the number of extracted precious metal even Africa and Latin America, between the printing of banknotes and minting of bullion is no direct correlation. In fact, the binding between two financial instruments is inversely proportional.

The reason for this strange, at first glance, the phenomenon is quite simple. The fact that produced in the United States precious metals are exported, and largely go into the coffers of the state. Due to this, there is a replenishment of gold reserves, which contributes to the preservation and increasing of the economic potential of the United States. Further, foreign exchange reserves are used for solving problems within the state.

The dependence of the dollar on the value of gold

Trading and real forex demoúčet, you can trace the relationship of U.S. currency to the price of gold for example dollar break. If the price of the dollar goes down the gold price immediately increases. It would seem that the logic in this fact. However, it has been confirmed in practice, proving that the higher the price of gold, the less worth a dollar. Inverse proportion is also observed. It is not surprising that the formula used for the correlation of those currency pairs involving the dollar, or currency, depending on the price of the yellow metal.

Other types of relationships

  • Commodity dependence. As you know, the United States of America along with China as the world leader in production of consumer goods. Remember, though, Apple products.
  • Risky dependence. If America gets involved in another armed conflict, regardless of its localization, then quotes the dollar starts to fall, forcing prudent investors to immediately invest in additional portfolios. As a result, the cost of precious metals, by contrast, is only growing.
  • The indirect dependency. Depends on the value of the U.S. currency and the precious metal, including from the index on a noble metal. For example, the Swiss franc directly tied to the gold reserves of the European States. And if the foreign exchange market position of the Swiss franc strengthened, composite currency will also increase. The dollar is also included in their number. On the other hand, if the dollar falls, it also leads to a depreciation of the franc and the Australian dollar.
  • Thus, if you plan to trade on the foreign exchange market is to pay attention to the dependence of U.S. currency from the gold price.