Gold vs. the Financial World

As a direct result of the abandonment of the Gold Standard by the United States and consequently all other currencies of the world, the precious metals market trades in a global sphere today.  These metals, like gold and silver are bought and sold daily amongst investors, nations, banks and federal reserves.  The shifts and impacts of supply and demand are greatly tied to other financial indicators we watch diligently. 

Today there are several factors that impact the demand of gold, silver and other metals.  They include but are not limited to:

  • Value of the US dollar in foreign exchange markets
  • Rate and impact of inflation
  • Rate of unemployment
  • Real estate indicators
  • Geopolitical tensions
  • Government monetary policies

gold v us dollar 1Across time and history the precious metals trading prices have shown patterns and trends in relation to financial markets and indicators like the value of the US dollar and the DJII. 

As the chart on the right depicts there is a direct relationship with the value of gold when compared with the strength of the United States dollar.  As the dollar continues to lose value from printing, inflation and other economic circumstances, gold does the exact opposite: it increases in value. 

11-8-11-Dow-vs-Gold-long-termMost traditional investment portfolios center upon the securities and stocks exchanged, like those in the Dow Jones Industrial Index.  The chart below is a clear sign of trouble for any long-term position in this market.  As you can seen when the Dow took a major hit August of 2011, there was an opposite response from gold: record highs in value.

gold-v-crude-oilOil is the lifeblood of western culture and industry.  Just as we are reminded at the gas pump, oil is not cheap and is on a continuous price growth across the last 10 years or more.  The price of oil is speculated by futures demands and supply limits from source nations.  This increase in price brings uponf more pressure to our economic vitality and thus encourages the increased demand, and value of gold, silver and other precious metals.  

The United States of America certainly has debt.  In fat across the last four years we have seen our debt ceilings and levels increased time and time again.  This action has a direct impact on the value of your dollar and the inflationary measures of fiat currency printing.  See in the chart below that this creates an association between gold’s value and the government debt of America.  Since 2005, each time our leaders decide to increase the debt limits there is a corresponding increase in the value of precious metals like gold.  
Keep in mind as you are diversifying your portfolio the concept that these unpromising economic times provide some certainty in the value of gold across time.  While the mistakes of economic policy are drastically impacting our vitality as a nation, they also have an impact on the gold and silver values in the global market. 

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