As it becomes increasingly likely that the US Federal reserve will raise rates as early as December (and yes, you might be reading this after the December meeting, but it still applies), gold is under pressure. The market logic is that, with a rate increase indicating that the US economy is getting stronger, the US dollar, in turn, grows stronger relative to other major currencies.
Since investors perceive the US economy as both stable and strong, they usually have their wealth stored in dollars, hence, the reason why the dollars is a reserve currency. However, once there’s panic around the US economy, which invariably threatens the value of the dollar, investors would understandably start looking for ways to secure their wealth, which would involve storing their wealth in anything other than the US dollar. Here’s where gold comes in to play, since it’s viewed as a preserver of wealth. Continue reading
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