What is the impact of the floods of US Dollar to the world gold price?
If the U.S. Dollar to flood the international market in 2010. What is the impact of this flood to the world gold price? To answer this question I use the famous quantity theory equation of exchange with him as in the formula above.
M is the amount of money in circulation, according to Mother Ministry statement above, then M is to be soaring in the year 2010. V is the velocity of money round, the experts generally doubt there will be significant changes for the global economy really has not fully recovered from the crisis since last year.
Since V is not spinning faster than before, put out the real sector of goods and services (Q) also will not change much. If in one equation, the left side increased sharply – then the right side will also be followed. Because one element of the right side will be relatively fixed (Q), then only one more element of the right side that could offset the increase in M on the left side. This element is P or the price level of goods and services in general.
So the increasing amount of money U.S. $ in the market this year, which amount may not be followed by the increasing of real sector output equally – will have an impact on rising prices of goods and services are significant – in units of currency to U.S. $.
International gold prices during this were purchased (votes) with U.S. $; the gold price in U.S. dollars will also experience a significant increase this year in line with the rising prices of goods and other services. The price of gold at the opening Sydney market this morning.
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