Changes To The Commodity Dollar Relationship Mean Cheap Gold

For gold investors, every relationship gold and silver have to other markets and assets is worth studying. The gold market is a complex one and you can never have too many answers. One question that has many gold analysts puzzled is the commodity dollar relationship. This relationship was inverted (i.e., as the US dollar rose in value, commodities like gold declined and vice versa) until very recently and many don’t know why.

Why do commodities and the dollar have an inverse relationship?

The main reason for the commodity dollar relationship is that the US dollar is the global currency reserve of choice. Almost all commodities are traded on the greenback, so when the US dollar loses value, countries across the world enjoy a higher purchasing power. That means they start buying more crude oil, natural gas, agricultural products, aluminum, copper, and of course, precious metals like gold and silver. Prices go up as demand from around the world kicks into gear. Inversely, a strong dollar hinders demand.

What happened to the inverse relationship?

Throughout 2017, the commodity dollar relationship that had held true for decades suddenly began to fall apart. As the dollar decreased in value, so too did the price of gold and other commodities. Analysts were puzzled to say the least, but there are some ideas as to why the relationship is now positive, rather than negative:

  • The euro is on a comeback after the Euro Crisis and now that a number of critical elections threatening the EU’s future have ended up with a number of pro-EU governments in power for years to come.
  • Uncertain US politics and the future of free trade deals like NAFTA mean the US dollar is suffering for instability.
  • Back in 2015, China, one of the world’s biggest importers of commodities of all types, devalued the yuan. Continued depreciation continues to take pressure off commodities.

Is there an opportunity for gold and silver investors to profit from the new relationship?

Analysts predict that the US dollar is in for a weak year in 2018. Despite expected rate hikes from the Federal Reserve, most other central banks around the world will also be increasing rates, minimizing the effect higher interest will have on investors. Until the commodity dollar relationship goes back to normal, that means cheap gold. Low gold prices mean investors can increase their position at a lower cost if they’re paying attention.

It remains to be seen how long this blip in the commodity dollar relationship lasts, but it does mean that gold will be a great buy for the foreseeable future, especially for Canadian investors. Low gold prices and a weak US dollar create the perfect storm for Canadian gold buyers. If you’ve been thinking about buying gold or increasing your gold holdings, visit Silver Gold Bull to learn more about buying gold online.

Canadians can buy gold online through large gold dealers with extensive inventories. One option many Canadian gold buyers use is Silver Gold Bull. Besides offering deals like discounted premiums and free shipping on large orders, they also provide wealthy investors with account executives to help them achieve their gold investing objectives. If you’re interested in taking advantage of cheap gold and silver right now, find gold bars and coins on Silver Gold Bull. The gold price in combination with the low US dollar have come together to provide a great opportunity.

In this article