Fluctuation in the value of U.S. gold over the last decade
As we can see from the graph the U.S. gold value surge is parabolic. This can be attributed to the low debt-to-GDP ratio in 2011 which led to speculations surrounding the recovery of the U.S. economy. The gradual growth in value in 2012 can be attributed to low-interest rates and monetary easing by the U.S. Federal Reserve (Hergt). The plunge in gold value in 2013 is due to the fear of gold sell-off due to the Cyprus banking crisis (Brown, Demetra,Theodossiou). The value of U.S. gold can be seen decreasing from 2013 to 2016. The U.S. Purchasing Managers Index was improving during these years which resulted in the strengthening of the U.S. dollar (Tsuchiya). The rate of gold is inversely proportional to the strength of the U.S. dollar. The sudden win of Donald Trump in the 2016 U.S. presidential elections caused a drastic increase in gold rates. In 2017, the dollar displayed losses against Euro and British pound. This was the cause of an increase in the gold value. 2018 disappointed the gold rates due to the shedding of holdings in gold-backed ETFs (exchange-traded funds) around the world (2018 Annual review). The trade war between the U.S. and China caused a surge in gold rates at the start of 2019. However, apprehensions surrounding the gold rate after the end of this trade war led to its decline later. The onset of Covid-19 since March 2020 and the subsequent lockdowns around the World, slowed the world economy. This led to the highest gold rate in the past decade. The news of corona vaccines towards the end of 2020 caused a dip in gold prices.
References
1. Brian Hergt, 2013, Gold prices during and after the Great Recession, U.S. Bureau of labour Statistics
2. Scott Brown, Demetra Demetriou, Panayiotis Theodossiou, Banking Crisis in Cyprus: Causes, Consequences and Recent Developments
3. Yoichi Tsuchiya, 2012, Is the Purchasing Managers’ Index Useful for Assessing the Economy’s Strength? A Directional Analysis, Economics bulletin
4. World Gold Council, 2018 Annual review, 2019
