How the U.S. Dollar Influences Precious Metals Prices

Modern market histories have carefully recorded economic performance and market growth over the last 100 years, and these numbers help us understand precisely how the U.S. dollar affects Precious Metals prices.

Exchange rates for the U.S. dollar are determined by analyzing factors like current American debt levels, interest rates and global economic market strength. Other considerations for the U.S. dollar are unemployment rates, consumer confidence, inflation rates and current oil prices. Gold, Platinum and Silver are all dollar-denominated assets because all global markets measure them in U.S. dollars. Since the early 1970s, Precious Metals and the U.S. dollar have shown a relative inverse relationship in their financial patterns. If the U.S. dollar is stronger, the cost of Silver and Gold typically stays low. When dollar exchange rates weaken, Precious Metal prices tend to rise.

Investors are less inclined to buy dollar-denominated Precious Metals when dollar values are high because the purchaser gets less for their money. This model is especially true for anyone using non-American currency since exchange rates against a strong dollar will be low. Exceptions include times when both the U.S. economy is strong and manufacturing demand for Precious Metal is also on the rise. Other markets tend to move in the opposite direction of the U.S. dollar, including oil and the euro.

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