Quote:
Originally Posted by droesparky
Does the USD and Gold have a inverse relationship?
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The best answer is "Usually, but it all depends."
In a perfect world, they would have an inverse relationship because you can substitute one for the other when investing.
When the US economy is strong like bull, people buy US dollar denomiated assets such real estate, stocks, bonds, (Justin Timberlake) CDs, etc. These purchases all increase demand for the USD, therefore increasing the price for USD. Even though the US dolla makes peeps holla, its still fiat money. This is just a big word for saying the US dollar is backed by nothing but the confidence of the country.
So when the US economy starts to suck, peeps start trippin' and dump their US dollar denominated assets into something tangible and stable like gold.
Now there are times when the market starts acting freaky and both instruments move in the same direction. So one can't say they are always
inversely correlated.