【Financial Investment】The Relation of the US Dollar with Oil Prices and Gold Prices
Economic Indicators That Help Predict Market Trends
- The negative correlation between gold and the U.S. dollar
First of all, the appreciation or depreciation of the US dollar will directly affect the changes in the international gold supply and demand relationship, leading to changes in the price of gold.
From the perspective of gold demand, since gold is priced in US dollars, when the US dollar depreciates and other currencies are used to buy gold, the same amount of funds can buy more gold, which stimulates demand, leading to an increase in the demand for gold, which in turn promotes The price of gold went up.
On the contrary, if the U.S. dollar appreciates, the price of gold will become more expensive for investors using other currencies, which will inhibit consumption and cause the price of gold to fall.
Secondly, the appreciation or depreciation of the dollar represents people’s confidence in the dollar . The appreciation of the U.S. dollar indicates that people’s confidence in the U.S. dollar has increased, thereby increasing their holdings of the U.S. dollar, and relatively speaking, reducing their holdings of gold, which leads to a decline in the price of gold; on the contrary, the depreciation of the U.S. dollar leads to an increase in the price of gold .
It is worth noting that the negative correlation between the US dollar and gold is based on the long-term trend. From the short-term perspective, exceptions are not ruled out. For example, in the previous period, the U.S. dollar and gold rose simultaneously. The reason for this is that the increase in market demand for hedging is likely to push the U.S. dollar and gold to rise simultaneously.
2. The positive correlation between gold and oil
Gold prices and oil prices usually move in a positive direction. The rise in oil prices indicates that the price of gold will also rise, and the fall in oil prices indicates that the price of gold will also fall.
Fluctuations in oil prices will directly affect the development of the world economy, especially the US economy. According to estimates by the International Monetary Fund, every US$5 increase in oil prices will reduce the global economic growth rate by about 0.3%, while the US economic growth rate may drop by about 0.4%.
When oil prices continued to soar, the International Monetary Fund also immediately lowered its expectations for future economic growth. Oil prices have become the “barometer” of the global economy.
The United States has always been a big consumer of crude oil, and low oil prices are conducive to the development of the US economy, thereby affecting the price of gold. Because consumers spend less money on oil and have more money to buy other things. At the same time, low oil prices also reduce the cost of US manufacturing; high oil prices often mean uncertainty in economic growth and inflation expectations heating up will push up the price of gold.
3. The negative correlation between the U.S. dollar and oil
The U.S. economy has long relied on the two pillars of oil and the U.S. dollar. It has placed nearly 70% of the world’s oil resources and major oil transportation channels under its direct influence and control through its super-powerful military force.
The inflationary pressure brought about by the rise in crude oil prices will bring depreciation pressure on the U.S. dollar, and the direct consequence of the depreciation of the U.S. dollar is that crude oil prices denominated in U.S. dollars also rise.
In the long run, when the U.S. dollar depreciates, the price of oil rises; when the dollar hardens, the price of oil shows a downward trend.
Simply put, gold will always be the uncrowned king overseeing the monetary system
Although gold is still under house arrest by hegemonic countries, its powerful deterrent will always exist. It doesn’t matter whether you are playing dollars, euros, or bitcoin, as long as you mess around, gold will punish you. Gold is the sword of Damocles hanging above the head, and it will forever shock this system.
Hegemonic currency must prevent the restoration of the king of gold
th century. After being bound with oil in the 1970s, when the U.S. dollar achieved hegemony, gold was strictly controlled by the United States, which can be seen clearly in transactions. If you pay attention to the gold market for a long time, you will see that whenever the price of gold soars, derivatives are always flocking to the market on a large scale, and the price of gold is suppressed by smashing the market. The dollar controls the price of gold through derivatives.
Why do the Fed and Central Banks control the price of gold?
Because the skyrocketing gold means that the U.S. dollar is dead, and the price of gold is the confidence index of the U.S. dollar. The strong dollar and weak gold represent the world’s confidence in the dollar . But the skyrocketing price of gold shows that there is a problem with the monetary system, and the whole world will have such an obvious psychological feeling, which is a natural reaction from intuition. The US dollar has such a relationship with gold.
How about the crude oil?
U.S. dollar settlement is bound to oil, making the world willing to hold dollar reserves. It is the most powerful psychological kinetic energy to increase holdings of dollar reserves and maintain dollar reserves. Because no matter which country needs oil, no matter where you go to buy oil, it is all settled in US dollars, so can you not save US dollars? Can you have no dollar reserves? Of course there must be. Unless the oil settlement system is completely converted to Euro and RMB settlement.
Many people have asked when will the price of gold up, along with the United States and the decline of the overall strength of the country , or countries, and the late-coming shift in the balance of power is reversed, the United States in the world of runaway hegemony , this will lead to runaway global monetary system. In this chaos, you will see who is the real king of money .
As an investor, you must always pay attention to market fluctuations and trends.It’s time to grasp the pulse of this rapidly changing era, make the right choice at the critical moment, and get faster progress and a better life.
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