Monday, August 10, 2020

Why are Gold, Stocks, and Bonds appreciating?

DISCLAIMER:  If I really knew, I wouldn't be teaching school! 

The Bloomberg Dollar(BBDXY) tracks the performance of a basket of 10 leading global currencies versus the U.S. dollar.  The above represents a decline in the price of a dollar (as it cannot buy fewer foreign currencies)


 ZeroHedge says that it is because the dollar is depreciating. As the dollar loses value (relative to other currencies), people shift money out of dollars into assets that (hopefully) won't lose value as the dollar declines. This increases demand for these assets which raises their price.

Of course, one has to beware confusing correlation with causation:  just because the prices move in opposite directions does not mean that one is causing the other to move.  There could be a third factor that is causing both movements.  

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