Hey,
I was just reading some answers to a question someone posted earlier about Gold retreating.
The answers which followed suggested that the US dollar and Gold are linked in terms of which way they go (up or down). This made me think… Why would people bet on Gold falling if the dollar is falling? I mean Gold is a rare and valuable metal. I’d think it would be inversely proportional to the dollars value. Doesn’t it make more sense that gold should go up?
If I invested $20,000 in gold. And the dollar fell, why wouldn’t gold go up? It’s a commodity which is sure to remain high in value around the world isn’t it?
Which brings me to another question… If gold falls when the dollar does, whats the point in having the bullion depository?
The price of gold floats freely in commodity markets. Which means that it’s not linked to any currency directly. The price of gold depends on the supply and demand, just like the price of oil and other commodities depends.
The price of gold is usually inversely related to the US dollar value. Because when the US dollar falls in value, then gold (which is priced in US dollars) becomes cheaper for the rest of the world to buy. This naturally increases the demand for gold and makes it’s price go up in US dollars. And the reverse happens when the US dollar rises in value. Gold becomes more expensive for the rest of the world to buy. Which decreases world demand for gold and causes its price to go down in US dollars.
No, it is not “sure to remain high in value.” Precious metal commodities are very volatile.