I need assistance with a graph and brief explanation of the price of gold as an economic indicator please.© BrainMass Inc. brainmass.com December 24, 2021, 4:58 pm ad1c9bdddf
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The prices of gold and industrial metals are rising because the Federal Reserve is sending needed cash into the economy. Gold and metals, of course, are key monetary and economic indicators, and their current surge confirms that the long, dark night of deflation has come to an end.
As long as the Federal Reserve keeps pumping the economy with sufficient new cash to boost investing, spending, and saving, it looks like we're set for something of an economic boom next year.
Another good guess is that commodity markets, which include gold and metals, are surging in anticipation of a rising growth of money in the European, (non-Japan) Asian, and U.S. economies. Good technology news is coming out of Asia, suggesting economic recovery is on track in that part of the world, and China is still growing. Europe will take longer to rebound, but there are scattered anecdotal reports of replacement spending on new tech equipment in Europe's private sector.
More info on gold:
Gold for June delivery fell $19.10, or 4.5 percent, to $401.60 an ounce last week on the Comex division of the New York Mercantile Exchange.
Gold declined early last week as the dollar rose following a boost in U.S. consumer prices and retail sales in March. Manufacturing also surged more than expected in the Philadelphia and New York regions this month, and companies increased hiring, Fed surveys showed.
Last week's decline in gold prices was the biggest in three months amid signs an improving U.S. economy may prompt the Federal Reserve to raise its benchmark lending rate as soon as this year. The Fed's last increase was in May 2000.
``I view the decline as a correction in gold rather than a trend change,'' said William O'Neill, a partner at Logic Advisors LLC, a commodities consulting company based in Upper Saddle River, New Jersey. ``The fundamentals remain positive for gold.''
It is well known that members of the Federal Reserve Board and other central banks monitor the price of gold carefully and consider it a good estimate of inflationary expectations. Moreover, some financial observers and economists are convinced that central banks may intervene from time to time to maintain a steady gold price. According to this view, a rising gold price is undesirable because it suggests increased inflationary expectations and a potential monetary crisis (such as a run on the dollar). Thus, when the price of gold moves up "too much," central banks sell gold. At the same time, a falling gold price is undesirable because it may imply deflation and recession. When gold falls below a certain price, central banks buy or simply stop selling.
How long central bank interventionism can last is anyone's guess. But eventually the market will reassert itself, just as it does whenever a form of price-fixing occurs, and gold prices will start rising again.
I have also attached a picture to this posting, charting the price of gold over the past year.
I hope I was able to be of assistance to you.© BrainMass Inc. brainmass.com December 24, 2021, 4:58 pm ad1c9bdddf>