Gold market and forex market are concerned by the investors, because they have a relatively perfect, just, fair environment and more investment opportunities. There is a very close relationship between the two markets. However, the gold market and forex market are unpredictable with benefits and risks. Thus, if you understand their mutual influence and role, may be able to find more investment opportunities.
The price volatility of gold market and forex market is affected by the same factors, such as political situation, war and unrest. If those events happened, the gold price and forex rate will be greatly affected. In additional, the crude oil is as one of the most important production materials, so its price volatility is also seriously affected the gold market and forex market.
In worldwide countries, the gold price is dollar-denominated, therefore, the fluctuations of dollar rate has a great impact on gold price. According to historical statistics in recent years, the price of gold and the U.S. dollar exchange rate are with about 80% negative correlation. Generally, the dollar fell, gold rose; the dollar rose, gold fell. The main reasons are as below:
First, the dollar’s ups and downs represent the market confidence in dollar assets. The dollar rose, the investors buy dollar-denominated assets to get profit; while the U.S. dollar fell, part of the funds lose confidence in dollar assets in favor of buying gold in order to preserve and increase the profit.
Second, the falling dollar, the exchange rate of euro, yen and other currencies rose, so that the gold price in Euros and yen-denominated is relatively cheap in the domestic gold market, which attracts investors to buy. These capital inflows naturally promote the rise of gold price.
Investment experts suggested, please think again before you decide to participate investing, and to know more knowledge and information about the gold and foreign exchange. Currently, there are plenty of websites about gold price and foreign exchange; the investors could gain the trend of market timely.