Is the Dollar Putting Gold at Risk?


Gold futures experienced a sharp rise this week in the US. The primary reason for this seems to be the minutes documented by the Federal Open Market Committee. The FOMC brought attention to the gap that is continuing to grow larger between the ever failing global economy and the dollar – which seems to be getting stronger. The combination of these two factors has thrown inflation rates into disarray.

The Fed commented that the occurrence of a strengthening dollar in conjunction with hesitant economic growth had the potential to pose further threats to the economy. The Fed has also voiced concerns regarding how economies are growing overseas and the impact this could have on the position of the dollar.

Financial experts have suggested that it would be likely that the Fed will raise interest rates in the beginning months of next year. However, analysts who believe this theory predict that this won’t have any influence over the price of gold.

The sharp rise experienced by gold futures following the minutes was the largest gain for investors in over four weeks. Senior commodities broker, Bob Haberkron, stated that the minutes had “really heated up the gold market” and that “the market is digesting the fact that rates aren’t going up in the near term”.

In the week prior to these revelations, gold prices were seen to decrease as speculation took place in regards as to whether banks were going to raise interest rates. Because gold doesn’t earn interest, investors are more likely to invest in equities or bonds when they can see that interest rates are beginning to go up.  

It has been suggested that recent improvements in relation to levels of unemployment could keep the price of gold steady for now as the economy is seen to stabilise. However, these statistics fluctuate frequently and cause price gains and drops as the news comes in.

Whether or not the price of gold goes up or down can depend on a wide range of factors and smart investors are likely to weigh up all of the relevant information before making the decision to purchase. If interest rates were to fall again, which is incredibly likely in such a tumultuous economy, then interest in gold would definitely peak again. However, on the flip side, if the dollar persists to strengthen then interest in gold may fall and as interest from investors falls, so too does the price of this commodity.

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