The Price of Gold in Global Currencies: Year-End Review

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It has definitely been a bumpy year for global markets.

Global inflation is still at decades-high levels, the global economy is on the verge of a recession, and Europe is facing a potentially severe energy crisis, mostly triggered by Russia's invasion of Ukraine.

To tame soaring inflation, central banks around the world have been raising interest rates, thus affecting the U.S. dollar and stock prices.

Obviously, all of this has impacted the gold price, which has had quite a bumpy year. However, it doesn’t mean that gold has performed poorly in all major currencies.

Let’s take a look.

What happened to the gold price in 2022: a brief overview

Like any other asset, gold has experienced some ups and downs this year.

Early in March, gold prices soared above $2,000 to their highest level since 2020 as investors sought protection from rising geopolitical risks and inflation.

Gold and the Fed effect

But since then, gold has lost some of its gains due to other factors that came into play. We call them the Fed effect.

As you know, Fed policy moves are one of the major factors influencing the gold price. There’s a general belief that the gold price usually rises when interest rates fall and vice versa.

So the U.S. central bank has started aggressively hiking interest rates to curb stubbornly high inflation, pushing the U.S. dollar to its highest level in two decades.

Gold and the U.S. dollar

In November, the gold market gained more than 7%. This was mostly caused by a drop in the value of the U.S. dollar and anticipation that the Fed would eventually slow the pace of interest rate hikes, making gold more attractive to investors.

Now, we know that there is a strong relationship between the price of gold and the U.S. dollar, in that the dollar rising and falling in value can impact the gold price.