How do these inter-relate?

Discussion in 'Economics' started by BlackAdder, May 7, 2007.

  1. Hi
    I'm new to the fundamental side of things. I wonder if anyone can help me understand how the Dow, the dollar, interest rates, gold price and the price of oil effect each other.


  2. Rising interest rates, diminishes inflation, slowing economic growth, generally being bearish for stocks.

    Oil generally increases costs, causing inflation, slowing the economy at the same time, i.e. stagflation. Generally, high oil prices are bearish for stocks. Oil price is less important now.

    Gold rises dramatically during extreme inflation periods, when cash accounts, bonds can't keep up with the real -or perceived- inflation. Gold isn't that important now, compared to pre-1972 when the dollar was backed by gold.

    A weak (devalued) dollar, makes imports more expensive, making exports more attractive to foreign buyers. Therefore a weak dollar can reactivate and boost the economy, rising corporate profits, and stock prices. On the other side a devaluating dollar may prompt investors to sell investments in US dollars, being bearish for stocks. So, for now, the dollar is quite a neutral factor.
  3. Most helpful thankyou