Gold, Dollar and Crude oil relations

[ITalkCash]

Many have wondered if there are any relations between the three of them, and they do have an impact on one another on a larger scale than many other things related to each other in the global markets.

1) Basically, Gold is an inflation Hedge. If inflation of any country ( Mostly Look at developed economies) increases, investors buys gold to balance their portfolio.

2. Crude prices directly affects the oil import bill of any country. Increase in Imports Bill will increase the Trade Deficit (Export - Imports) of countries (Mainly watch out US Trade Deficit Data). Higher Trade deficit would hit the value of currency of the country. This will affect the money circulation in the economy there by leading inflation ( Here applies the logic of " Too much money chasing too few goods). So, If Crude price rises, Gold will also move Up.

3. As you know most of the countries has got Foreign Reserves. And these reserves are in form of Dollars. For example, India boasts about 140 Billion Dollars of reserves. If the dollar looses value, the entire basket looses value. So, countries will look for safe heaven i.e. Gold. If Dollar looses value, Gold will move Up.