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CPM Group’s Jeffrey Christian discusses the relationship between gold prices and economic indicators such as interest rates, currency exchange rates, and inflation.
Key points from the discussion include:
That gold, interest rates, the dollar, and other economic indicators are reacting to other independent variables rather than directly influencing each other.
That recent fiscal policies, political issues, and international tensions, including Russia’s invasion of Ukraine, have affected interest rates, the dollar, and gold.
Historical data shows that real negative interest rates have tended to support rising gold prices. However, the reason for interest rate changes is more important than the change itself when considering the impact on gold. For example, if the Fed can control inflation without causing a recession, it would be negative for gold. If it fails, it would be positive for gold.
The relationship between the dollar and gold is not as straightforward as some believe, as they can sometimes move in the same direction.
Why, Despite rising inflation, gold prices have remained high.