subject: The Relationship Between The Dollar Value And Gold Price [print this page] A person who is conscious of the buying and selling of US$ gold price and the Dollar Index, would undeniably be aware of the fact that they are related in inverse proportion. The worth of money is in jeopardy of sinking steeply, and it is ever more likely that the world transitory system will have another hyperinflation, parallel to what occurred back in the 70's, except for the fact that this time it is going to be even worse.
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 whenever 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.
The recent trends signify that when the dollar weakens in the foreign exchange market over an extended period of time, the gold prices generally rise during that period. This is the reason why gold is referred as a hedge during inflation.
For the duration of the collapse of the US Dollar, the value of gold typically appreciates and the rates of silver; platinum and palladium typically face a turn down. There are periods of recessions when gold and the US Dollar fail the inverse correlation over a short span of time. Although in the long-term, this inverse affiliation does not drop its grasp and the reciprocal inclination 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.
Also, the fact cannot be ignored that when it comes to gold and recession, there comes a point that the US Dollar faces extreme decline in its value and worth. At the same time, all business men, shareholders, stock holders show extreme amount of interest as far as the trading of gold is concerned.
Gold has still an edge of support and the fact remains that when gold reaches its zenith, dollar is not anything more than a sheer bit of paper. Because of these very reasons, they both remain in a reciprocal association, where one side profits and the other side suffer. Yet both are such valuable possessions that buyers do not abstain from investing their money in.
