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What affects gold prices?

Many things affect gold prices, but there are some interesting indicators. Here's a commodity trading course guide to some of the most important.

Yen/dollar

The US dollar has been on the slide for some time now against most major currencies. So the more the greenback declines the higher gold is likely to rise when measured in dollars.
As such, the USD's performance against the Japanese yen can be used as a rough guide to how the dollar will fare against gold.

What affects gold prices? the Yen/Dollar

Source: MoneyWeek/Bloomberg

In this chart the gold price is in yellow and the inverted $/yen rate is in blue. As you can see, the further the USD drops, the higher up the chart the blue line goes.

The 144-day moving average

For the best part of five years, every time that the gold price has dropped to its 144-day moving average it has bounced back sharply.

For much of 2012, the 144-day moving average acted as a line of resistance. In the summer, however, gold broke through the blue line and rally to $1,800.

As this chart below shows, the 144-day moving average is a key indicator for commodity traders.

What affects gold prices? The 144-day moving average

Source: MoneyWeek/Bloomberg

Gold price and silver price

Both gold and silver are seen as safe havens for investors. But silver is more affected by industrial demand than its yellow cousin, so its price movements can be more volatile.

What affects gold prices? Gold price and silver price

Source: Macrotrends

"Extreme levels in the gold/silver ratio can also coincide with turning points in equities," explains MoneyWeek. "That's because the ratio shows the level of silver speculation. If this becomes excessive, it can point to parallel heavy punting in other higher risk investments, like shares.

"So when silver hits a high compared with gold, it can mean everyone turning bullish. Then there's only one way stocks can go - down."

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