Gold is a very popular way of investment, and has been so for many years. It makes sense too; after all, since the gold standard, there have never been any economic or financial crises like we are experiencing today. Gold is a store of wealth that can be gotten easily from one country to another, and it doesn’t really matter where it is bought. So why is gold so popular? What is the answer to what makes gold so valuable and is it susceptible to economic turbulence in US Treasury bonds?
First of all, you should understand that gold prices are highly sensitive to fluctuations in the US Dollar. In fact, they are sensitive to every economic indicator out there. Gold prices have been highly sensitive to interest rate changes, to changes in the Consumer Price Index (CPI), to changes in the GDP growth and employment, and to changes in the balance of trade. Even when there are negative reports in major newspapers about the state of the US economy, gold prices don’t go down, but up. This means that when economic data shows a sign of improving, gold prices go up.
Gold dealers report that when interest rates start to rise, gold prices start to soar. Of course, when interest rates rise, so does inflation and consumer prices. This is when investors realize that the value of the dollar is going down. This is when large holders of gold open up their cash positions, and the demand for gold starts to increase. Gold prices are not immune to economic indicators, and they are not immune to government intervention either.
The fact is that the recent economic indicators we see all point to an impending collapse of the US economy. The collapse of the US economy will result in an increase in unemployment, a decrease in economic activity, and a change in the balance of trade. When this happens, the buying power of the dollar will decrease worldwide, and this will lead to an increase in gold prices. Gold prices are not immune to these events. In fact, they are highly sensitive to them.
In addition, the recent economic indicators we see point to a US Dollar weakening versus the Euro, Japanese Yen, and Swiss Francs. These economic indicators cause the price of gold to increase. Therefore, gold prices are sensitive to fluctuations in these other currencies as well. Gold is purchased and sold on the commodity market, so its price is always relative to the US economy. When US interest rates rise, the Euro and the Japanese Yen appreciate in value, which causes gold prices to increase, as investors shift their assets from the US Dollar to the Euro and the Yen. In addition, when the Swiss Franc appreciation causes the Swiss Franc to appreciate in value, this also increases gold prices.
If the US Federal Reserve raises interest rates, this will have a major negative effect on gold prices. Gold is a global asset, and it is not possible for the US Federal Reserve to increase the US money supply enough to change the global gold demand and supply. This is because gold is a “hard” good, unlike paper. Paper can be printed whenever the need arises, but gold is only printed when there is a need to do so, and this process takes place in the physical world. Therefore, by purchasing physical gold, investors protect their wealth from inflation caused by the Federal Reserve’s actions in the economy.
However, gold is not the only good that can be printed when the economy faces economic difficulty. There are many goods and services that can be printed when economies become troubled. Therefore, gold prices may temporarily decrease when the US economy suffers economic difficulties, but this decrease will soon be reversed once the Federal Reserve raises interest rates. Therefore, gold prices are sensitive to fluctuations in US treasury bonds, economic indicators, and gold mining stocks. If you are an investor who does not want to have to worry about changes in gold prices when they rise and fall in tandem with US treasury bonds and other assets, you should consider buying gold stocks.
Although there are many reasons investors may want to invest in gold, there are only a few good reasons. One reason is its price sensitive nature; gold prices can be affected by various economic indicators ranging from interest rates to consumer spending. However, many investors base their investments in gold on speculation alone, and this speculation is based largely on economic indicators. The best time to buy gold is when it is not affected by any economic indicators. Once the US Federal Reserve raises interest rates, gold prices will likely increase because of the increased demand from investors.
Gold Price Susceptible to Rebound in US Treasury Yields
