A Review of Gold Pricing: Real Interest Rate and U.S. Dollar Index
DOI:
https://doi.org/10.47611/jsrhs.v12i3.5028Keywords:
Gold Prices, U.S. Dollar Index, Real Interest Rates, InvestmentAbstract
This paper explores key factors that could indicate the price of gold, with a specific focus on the real interest rate and the United States Dollar Index (USDX). By analyzing existing literature and historical events, this paper establishes the real interest rate as the primary driver of the price of gold and concludes that it could be used to predict future gold prices. As many existing studies purpose a negative relationship between the price of gold and USDX, this paper goes on to examine this relationship while considering the real interest rate. This paper purposes that the change in the U.S. real interest rate, relative to real interest rates in other countries, exhibits a positive correlation with the USDX. The real interest rate emerges as a key influencer for both the price of gold and USDX, potentially providing an explanatory framework for the relationship between the two. The finding of this paper is significant for researchers and investors seeking to predict future gold prices and study the relationship between the price of gold and USDX.
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