Gold Made Simple asks the question what part has the US dollar played in the recent rise in the gold price
May 28, 2010 (PRLEAP.COM) Business NewsThe fluctuating US dollar has played a big part in the recent worldwide economic crisis. The dollar has an inverse relationship to the price of gold. Generally this means as the US dollar goes up in value the price of gold bullion falls. Gold Made Simple asks what part the US dollar played in the current global financial turmoil.
Gold is usually considered to be a long term investment that is used as a hedge against inflation. Gold performs well in a crisis as investors buy gold bullion as a safe haven for assets. This is evident in the recent crisis that has hit the world economies.
Much has been written about what brought about the recent credit crunch. Analysts are in agreement that it was sparked initially by the over lending of money at a cheap rate which created a huge debt bubble as more people invested in property. One of the major culprits was the Americans who introduced the over ambitious "Ninja" mortgages which were sold to those with no income, no jobs or assets. This enthusiastic plan fell flat on its face when the interest rates in USA rocketed and borrowers defaulted on payments. This resulted in fear spreading throughout the rest of the world and lending from the Central Banks dried up as they suffered huge losses.
At this time Britain, who was enjoying a period of rising house prices and a fall in unemployment, were suddenly thrust into chaos. The market suddenly lost confidence in the Central Banks. Investors took action and decided to hedge against further economic turmoil and backed gold bullion as a safe haven for their money. The value of paper currencies then began to fall the world over and coupled with the fluctuating US dollar, the price of gold began to rise considerably.
The weak dollar generally pushes the price of gold up but there are occasions when the gold-dollar relationship moves in the same direction. This has been evident recently. Investors and central Banks have been investing in gold bullion in an attempt to ride out the current economic problems. Confidence in paper currencies is at an all time low as attempts are made to resolve the difficulties the debt ridden euro nations are facing. Initially the US dollar took a tumble in price as expected as gold rose sharply in price. At present however, this is not the case both gold and the dollar are increasing in value.
With a bullish market at present investing in gold makes perfect sense. Gold Made Simple guide investors through an easy step by step process of buying gold bullion safe in the knowledge those gold investments will yield a good return.