When The Dollar Goes Down

[Marchas45]

When the dollar goes down why is Gold and Silver going down? I have noticed this the last couple of weeks but wouldn't you expect gold and silver to go up when the dollar goes down?

 

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[jim4silver]

There are many variables in play. For example, the dollar in a sense competes with other currencies, and the way the dollar value number is calculated (the US dollar index) depends on the performance of six other currencies (called trade weighted average): the Euro, Yen, Pound, Canadian dollar, Swedish Krona, and Swiss franc. The primary component of the index is the Euro (57+%). Thus, the US dollar moves opposite to these foreign currencies generally speaking, depending of course on the percentage that the foreign currency is used in the index (Swiss franc is only 3+%), so its movement will have not much impact on the dollar index, but the Euro will since it makes up such a large part.

Now on to the answer to your question, gold is traded all over the world, and like in the US, gold GENERALLY moves counter to the local fiat currency. Let's say the Euro is crashing at any particular time (which would mean the US dollar will be moving up for the most part), but Europeans or those playing a Euro trade are buying gold because of the diminishing Euro value or fear it will crash and become worthless, like we do here with the US dollar. If the buying of gold is great enough it will make gold go up due to the increased demand for it, but the US dollar might be going up too because the Euro is falling. So on that particular day you might see an increase in the gold price and an increase in the US dollar.

Just my opinion of course.

PS Gold has recently hit record highs in prices not only in US dollars, but also in Euros, Pounds and Yen. Probably in other currencies too, but I don't know for sure.

Jim

 

[Marchas45]

Thanks jim great explanation l now understand. Thanks, Charlie