Jakarta, CNBC Indonesia – The world gold price in the spot market experienced a slight decrease of 0.11% in the past week and closed at US$ 1,850.77. The decline in gold prices occurred when the US dollar index which tracks the greenback’s strength against other currencies rose 0.46%.
The US dollar is indeed the strongest rival of gold. The prices of these two assets tend to move in opposite directions. This is because gold was once a medium of exchange and was used as a reference for the monetary system.
The increase in the US dollar was due to the aggressive policy of the US central bank in tightening its monetary policy. However, today’s conditions are different from a decade ago. Although the Fed is much more aggressive in raising its benchmark interest rate and withdrawing liquidity from the financial system, the gold price has not actually entered a bearish phase.
In fact, in 2013, the echo of the normalization of US monetary policy was widely heard, the price of gold was severely depressed. In fact, the price of gold fell more than 50% in 3 years. This is due to the different macroeconomic conditions between the past and present, especially in terms of risk.
Currently, inflation in developed countries, especially the US, is still stubborn. Prices of various basic needs, especially food and energy, are still high and inflation is at its highest level in 4 decades. It is also feared that aggressive monetary tightening will lead to a recession, which means that economic output will contract.
This means that in the midst of looming risks, gold remains one of the alternative assets for hedging, so the price has not fallen too much.
For the record, the US dollar index has strengthened 6.43% during the year and gold prices have been observed to rise 1.22% at the same time.
CNBC INDONESIA RESEARCH TEAM
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Dear Mother, this is how the movement of gold prices this week
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