Gold price Forecast: US Dollar, Treasury Yields Diverges and Drives Down Trend, by John Grace, PhD, is a very timely and insightful report. It explains why the recent break out of the market in gold has been so spectacular.
In the past, many investors and analysts thought that the dollar would be strong. But in the last decade, as currencies became weaker and weak currency markets began to experience a reversal in their trends. So how has this reversal in trend happened?
If you consider what the United States Dollar is and the role it plays in the global economy, the answer is quite simple. As a matter of fact, a US Dollar is what is known as a global reserve currency because it is the largest reserve currency in the world.
Now, the US Dollar is an international monetary system, and as such, when we have weaker currencies there will be a stronger demand for the US Dollar. When there is a strong demand for the US Dollar, then the US Dollar has a strong position in the international monetary system.
So the weakness in the US Dollar will create more demand for the Dollar. In addition, when the dollar strengthens, then this will cause other countries to do the same because the currency market is an international one.
Now this is how the gold market works. When the US Dollar strengthens it means that the value of the dollar goes up.
The price of gold goes down when the US dollar becomes weaker. As we can see, the break out of the gold market in the last few weeks was the perfect opportunity to buy gold.
John Grace, PhD has put together the Gold Price Forecast: US Dollar, Treasury Yields Diverges and Drives Trend in a very useful and detailed piece of writing. It is a must read and definitely worth your time to look through.
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