All That Glitters is Not Gold

All That Glitters is Not Gold

All That Glitters is Not Gold

Gold is currently in decline as speculations regarding a possible rate hike are spreading. Janet Yellen, Chair of Fed Reserve, claims the U.S. economy is resilient and is able to cope with such rate hikes “in coming months”. Precious metals have always been connected to the USD, so when the dollar goes up, gold falls in value. As it seems right now, inflation is high and prices gone up tremendously which led the dollar to go up as well. That combining with the expected interest rate hikes will lead the dollar skyrocketing to new heights.

What does this interest rate have to do with this gold decline? Well, the meaning of the dollar rising is less global liquidity which causes commodities to decrease in value. The higher the interest rates are, the less liquidity there is in the global economy. This is somewhat ironic because this situation leads to a bit of a halt in the economy which causes the interest rates to go down and so the circle repeats itself.

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