The Federal Reserve's interest rate hikes will have a considerable impact on global financial markets. In addition to the stock market, the price of London gold is also greatly affected by the Federal Reserve's monetary policy. When the Federal Reserve raises interest rates, the price of gold usually falls sharply. This is the gold investment market. One of the very basic rules of capital.
Why does gold price fall when the Fed raises interest rates? This is because the Fed's interest rate hikes will cause the U.S. dollar to appreciate, and London gold quoted in U.S. dollars will tend to depreciate. Currently, the two most influential gold trading markets in the world are the New York Stock Exchange and the London Gold Spot Gold Market. The gold products in these two trading markets basically dominate the pricing power of global gold prices.
However, both COMEX gold on the New York Stock Exchange and London gold are quoted in US dollars. Therefore, for gold, even if its own value will not change much in the short term, without being affected by other factors, Its price will change according to the price of the US dollar.
When the Federal Reserve raises interest rates, the market demand for U.S. dollars will increase, so the U.S. dollar will tend to appreciate, that is, the price of the U.S. dollar will rise. When the U.S. dollar appreciates, more gold can be bought with the same amount of U.S. dollars, that is, the same amount of gold can be purchased with fewer U.S. dollars, which means that the price of gold quoted in U.S. dollars falls.
Therefore, if not affected by other factors, the trends of the U.S. dollar index and gold price are basically opposite. That is, if the U.S. dollar rises and the gold price falls, the gold price will rise if the U.S. dollar falls. This is the basic law of gold investment. In addition, the Fed's interest rate hikes will make holding gold uneconomical, causing gold to be sold by investors.
Since the value of gold is recognized by the whole world, it is more reliable than the currency of any country. After all, as long as you hold gold, you can exchange it for the currency of any country, which is why buying gold can be a safe haven. However, gold itself does not generate interest income. The income from buying gold mainly comes from the rise in gold prices, but the possibility of continued sharp rise in gold prices is relatively small. Holding physical gold is unlikely to bring high returns. Some gold products with financial leverage The emergence of London gold has met the needs of gold investors pursuing high returns, and London gold is a representative product among them.