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While gold price trends mostly stem from changes in supply and demand, that's not the full story. Sometimes the value of the U.S. dollar changes the gold price - and this can cause a misleading view of the true value of gold...
You see, most of us track gold priced in U.S. dollars. As the dollar gains strength, it takes fewer of them to buy the same quantity of gold. The opposite is true when the dollar weakens.
Part of the reason gold prices move up or down is they reflect this change in U.S. dollar value. So higher gold prices do not always mean higher demand.
But if gold prices rise not just in U.S. dollars, but in other major currencies, you know that higher demand is a factor.
Determining how much a change in the gold price is caused by U.S. dollar fluctuations helps to measure the true value of gold. And there's a tool that does just that.
Gold Price Trends: Using the KGX
Kitco, a Canadian gold dealer, has a great website that tracks all things gold.
They've developed the Kitco Gold Index (KGX). KGX provides the price of gold measured in the U.S. Dollar Index.
The U.S. Dollar Index is a basket of major currencies weighted as follows: 57.6% euro, 13.6% Japanese yen, 11.9% U.K. pound, 9.1% Canadian dollar, 4.2% Swedish krona, and 3.6% Swiss franc.
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That means the Kitco Gold Index measures the price of gold in terms of six major global currencies - not just the U.S. dollar.
As you can see from the chart below, as of mid-December, gold had remained relatively steady, and even gained so far last year, when measured in the basket of major currencies detailed above.
KGX also includes a table near the top of the page, which looks like this:
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