The pound has been rising against the US dollar recently. And as the dollar has fallen, so the prices of various commodities, such as gold and silver, have been rising. So what are the reasons for these currency and commodity price movements? The simple answer is that they merely reflect changes in demand and supply. But why have demand and supply been changing? Are there changes in the underlying economic fundamentals, or do they largely reflect speculation in times of uncertainty and resulting market overcorrection? The following articles address these questions.
Sterling rises on hopes of recovery Financial Times (4/6/09)
Jeremy Warner: Dollar weakness is a sign that things are on the mend Independent (4/6/09)
Stephanie Flanders Blog: What goes down… BBC News (3/6/09)
Dollar on the rack International Business Times (1/6/09)
Sterling hits six-month high against the dollar Times Online (29/5/09)
Exchange rates: What next for the pound? This is Money (2/6/09)
Gold News BullionVault (3/6/09)
The Top 10 Reasons to Hold Gold, Bar None! The Motley Fool (2/6/09)
Questions
- Explain why the pound been rising strongly against the dollar.
- What is likely to happen to the exchange rate of the pound against the dollar and the euro over the next few months?
- If it were possible to predict the future exchange rate today, what would happen to the exchange rate today?
- Why might it be a good time to buy gold? Why might it be too late?