8:55 AM
AGHA
Gold finally regain its highest position after about a month drop. As we can see the graph below, gold touched IDR 515,000 which equals to approximately USD 1156/ oz (and may be still moving upward) as of August 21st.
This movement happened since The Fed can't reach the inflation target yet. What's the implication? What's the relationship between gold's price and inflation target? How can gold keeps its uptrend? And the story begins...
Simply, when your country's inflation rate rises, the government will raise interest rate.
All investors know this slogan; "The higher interest rate, the higher return will get", " With great rate, comes great return", etc.
Investors will put money in your country, expecting high return. When money flow in, there will be an opportunity to have a good economic growth and therefore your currency moves up.
The illustration above is one of the reason how US Dollar gets stronger lately. The fact is, US inflation rate is still out of target. It means, The Fed won't raise rate for a short-term. Finally the investors doubt US economic outlook. See the picture below.
Since The Fed gives you uncertainty, you will leave US and seek for another safe haven. You will put your money in gold for the stability of its trend. With the high demand of gold, it continues to grow.
Certainty! Gold gives us Certainty! Even Prophet Mohammed said so.
Well, to improve our knowledge about how money works, let's keep discussing and sharing. See you next post.
