Gold as an Economic Barometer

Rising Gold a Warning

Gold and the dollar are inversely related; as the dollar weakens the price of gold rises, and vice versa. But it isn’t always easy to explain the reason behind the movement of the dollar against gold.

The recent gold rally has investors and analysts speculating about the causes, with several theories persisting.

Conventional wisdom says that gold can tell if there is about to be another spot of loose money made available by the worlds key central banks. But not too many observers are willing to say that gold is telling us about the approaching crisis, warning of impending trouble about to develop on the economic stage.

Yes the dollar is weak, and gold is going up, but why is the dollar weak? Some say its due to the rumors that Ben Bernanke, chairman of the Federal Reserve Bank, is hinting that there might be a third round of qualitative easing, known as QE3. Also rumors of upcoming bond-buying by the European Central Bank to help save the euro zone can be playing havoc with the dollar.

“It’s no secret that one of gold’s best attributes is as a barometer of economic crisis. It would appear that the yellow metal is once again serving this function.”

Published by James Heinsman

James has worked as a hedge fund manager for years. As someone who has always enjoyed multi-tasking, James brings his vast financial experience and his hedge fund background to his position as writer and editor for Hedge Crunch. Editor James Heinsman can be contacted at james(at)hedgecrunch.com.