Gold is a relatively stable currency, and it is also a universal currency. Although the value of gold is relatively stable, its price will also be affected by many factors. This article will introduce you to the factors that affect the price of gold and the relationship between the price of gold and foreign exchange. Friends who invest in foreign exchange may wish to take a closer look.
Factors affecting the price of gold
Political Factors. Gold is called natural currency, and in all countries and dynasties around the world, gold is used as natural currency. The hedging attribute is one of the important attributes of gold. During the special period when the country’s political situation is unstable, the price of gold will rise accordingly. On August 19, 1991, the Soviet Union disintegrated, and the price of gold rose by more than 10 US dollars within 3 minutes. In the Gulf War in 1992, the price of gold at that time remained stable at US$400. When the war gradually subsided, the price of gold fell rapidly, and the price of gold fell by more than US$50 within six months.
Macroeconomics. Since the U.S. dollar has become the world’s mainstream currency, the price of gold has been closely related to the U.S. dollar! That is, if the U.S. economy is improving and the U.S. index rises, the price of gold will fall. Conversely, the U.S. index fell and the price of gold rose. Secondly, the price of gold is also related to the price index and inflation rate of the United States, that is, the price index rises, the inflation rate rises, and the price of gold also rises. That is, the price of gold has a positive correlation with the US price index and the inflation rate.
Supply and demand. Although gold is called natural currency, its essence is also a commodity. Since it is a commodity, it will follow the inherent price principle of commodities. When the market demand for this product continues to increase, the price of the product will rise. The opposite is also true.
Oil relations. The price of gold is also directly related to another important commodity, that is, the price of oil. As we all know, both oil spot and oil futures are priced in U.S. dollars all over the world. Changes in oil prices not only reflect the supply and demand of oil, but also reflect changes in the U.S. dollar. The U.S. index rose, crude oil prices fell, and gold prices fell!
The relationship between gold price and foreign exchange
The gold market and the foreign exchange market have attracted the attention of investors due to relatively complete, fair, fair and more investment opportunities. More and more investors have joined the foreign exchange and gold markets. But the gold market and the foreign exchange market are changing, and the returns and risks are like twin brothers. If you understand the mutual influence and effect of the two markets, you may be able to discover many new investment opportunities. The editor of Spot Home tells you how close the relationship between gold and foreign exchange is.
The price fluctuations in the gold market and the foreign exchange market are affected by some of the same factors. The current trend of globalization and integration of the world economy continues to strengthen, bringing about the great integration of the world financial market. International capital can flow freely and rapidly among various markets, thereby further linking various markets around the world. The rise and fall of prices are closely related to each other. For the world’s largest market-the foreign exchange market (measured by volume) and the most historical gold market, the two are inextricably linked, and their respective price fluctuations and market changes have certain implications for the other market. influences.
Gold and foreign exchange are closely related. What is the impact of the foreign exchange market on the gold market? Since the world gold market is priced in U.S. dollars, the fluctuation of the U.S. dollar exchange rate in the foreign exchange market has a great impact on the price of gold. According to historical statistics in the past 10 years, there is a negative correlation between the price of gold and the exchange rate of the US dollar by about 80%. Generally speaking, when the US dollar rises, gold falls; when the US dollar falls, gold rises.
There are several main reasons: First, the rise and fall of the US dollar represents the size of the market’s confidence in US dollar assets. A rise in the US dollar can attract funds to buy US dollar-denominated assets in order to obtain profits; while a fall in the US dollar means that some funds lose confidence in US dollar assets and switch to buying gold in order to maintain their value and make profits. The second is the fall of the U.S. dollar, which means that the exchange rate of currencies such as the euro and the yen has risen, and the price of gold priced in euros and yen in the domestic gold market appears relatively cheap and attracts investors to buy. The inflow of these funds naturally promoted the rise in the price of gold.
The impact of gold price fluctuations on the foreign exchange market is mainly reflected in the impact on commodity currencies. The main characteristics of commodity currency countries are high interest rates, a relatively high proportion of exports in GDP, a major producer and exporter of some important primary products, and their currency exchange rates fluctuate in the same direction as a certain commodity (or gold price). The main commodity currencies are Australian dollars, Canadian dollars, New Zealand dollars, Norwegian kroner, and South African rand. As an important commodity, gold’s price rises and falls also have a certain impact on commodity currencies. Generally speaking, the rise in the price of gold can drive up the exchange rate of commodity currencies, especially for important gold exporting countries such as South Africa, which is a positive factor. The price of gold has risen sharply in recent years, and the exchange rate of the South African Rand has risen accordingly.
The price fluctuations in the foreign exchange market and the gold market are affected by some of the same factors. The current trend of globalization and integration of the world economy continues to strengthen, bringing about the great integration of the world financial market. International capital can flow freely and rapidly among various markets, thereby further linking various markets around the world. The rise and fall of prices are closely related to each other. For the world’s largest market-the foreign exchange market (measured by volume) and the most historical gold market, the two are inextricably linked, and their respective price fluctuations and market changes have certain implications for the other market. influences.