Is there more to the relationship than that? And what happens to gold and other precious metals during a recession?
From January 2000 to February 2008, the US Dollar Index fell 30% while the Commodity Precious Metals Price Index rose 250%. That suggests that a weakening in the performance of the US dollar results in a strengthening in the performance of precious metals, and vice versa. That substantiates the findings of a 2006 World Gold Council report which identified an inverse relationship between the US dollar and the price of gold
Assuming everything else is equal, then theoretically, the nominal price of precious metals will adjust to a weakening dollar in order to reflect their ?real? intrinsic value.
However, it is also plausible to assume that a weakening in the Dollar, coupled with an increase in global income, especially from emerging market economies, may have contributed to a boost in demand for precious metals at some point during this cycle.
Anthony Grech, , in his 2008 ?Precious Metals? Report explained that ?the dollar generally finds support, and consequently appreciates, during recessions. This occurs because the market is forward looking and immediately starts to factor in an economic recovery?.
Assuming that the inverse relationship between gold and the US dollar holds, a US recession is likely to support the US dollar and this is likely to push the price of precious metals lower.
There is an inverse relationship between the US dollar and the price of silver, platinum and palladium, especially during US recessions.
However, this relationship does not hold for the . During recessionary periods the price of gold and US dollar tend to rise together.
This suggests that gold is not only a long-term hedge against inflation and a short-term ?hedge against crises? but unlike silver, platinum and palladium, a recessionary hedge.
In the long term, however, the findings of the World Gold Council are justified as there is a visible inverse trend between the price of gold and the US Dollar Index. NB. Financial spread betting carries a high level of risk and may not be suitable for all classes of investor. Only trade with money that you can afford to lose. Make sure you fully understand the risks involved. If necessary, seek independent financial advice.
As we look at the stock market they seem to be on roller coaster ride with a northwards hike one day and a southwards slip the other day. The real estate market is no different either and indeed it appears to be on the blink of death. Under these circumstances if you are wondering where to invest your money safely and still take home some decent profit gold trading seems to be right on for you.
Why Gold trading?
Indeed gold trading has become a buzzword these days with stock market in mayhem and many investors are slowly shifting gears to silver and/or gold spot trading. You may wonder how when the price of these metals is down can fetch you some profit.
But it is this simple math. Isn't it the right time to buy something when its price is low? It is indeed. Because the gold forecast says that the low metal's price is only a temporary phenomenon and that it will soon go past 1000 clams for an ounce of it.
And, here, as you contemplate on gold trading you will first need to have an gold trading account opened with any spot trading broker. Its an online transaction account and one can buy and sell units of gold using broker's account. It is then you should have a reliable gold broker or a gold trading service provider so you can trade online.
But like in any other investors? market, gold trading market also is filled with low-profile service providers, who can be your rippers. So stay informed before you foray into gold spot trading.
Some important considerations in picking your gold trading broker:
Should be well versed with the analysis of yellow metal market. Its better if the gold forecast signals are sent on a periodic basis. Not to mention the signals given by the broker should be confident enough.
Should be available to you anytime to implement your transactions with a sense of honesty. Be learned of how the broker functions before hand.
Cost effectiveness is another important consideration; although, it is not the sole consideration of choosing the gold spot trading broker.
Hidden costs. It is where majority of traders skim the investors. So as you start your gold trading with a gold trading broker, you need to take time to look into the details of pesky fine prints and ensure there are no hidden terms and additional service charges than what they say.
Alacrity is another virtue for selecting a broker as the prices in gold trading change very swiftly, the broker needs to implement your order with as much speed, a delay in a second may often times results in a havoc. So ensure that the service provider functions with alacrity.
Check out on the fringe benefits or add-ons the service provider offers you for the same price.
Check if the service provider asks for high account balance. Its wise to go with one that asks for a low balance.
Knowing these it is easy to narrow down to the best gold trading broker with whom you can start making some money.
You can start spot gold trading online just choose any good online broker i.e odlsecurities, fxpro, avafx, etc.
Both Daniel Jones & Gold Silver are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Daniel Jones has sinced written about articles on various topics from Investments, Day Trading and Investments. The author is an experienced trader and respected commentator on the gold futures markets.. Daniel Jones's top article generates over 8100 views. to your Favourites.
Gold Silver has sinced written about articles on various topics from Finances, Investments and Finances. Check with the gold forecast services offered by The gold trading with this gold signal provider comes with a week trial. If you believe that. Gold Silver's top article generates over 4400 views. to your Favourites.