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Assume inflation is 2% and it is expected to increase to 6% by the end of...

Assume inflation is 2% and it is expected to increase to 6% by the end of the year. What is the impact in the peice of gold? show graphically and explain.

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Expert Solution

When inflation rises the value of currency goes down and therefore people tend to hold money in the form of gold.therefore,in times when inflation remains high over a longer period,gold becomes a tool to hedge aganist inflationary conditions.this pushes gold prices higher in the inflationary period

Therefore if the inflation increase from 2% to 6% by the end of the year then prices of the gold increases according and the prices are moved by the combination of supply,demand and Investor behaviour.That seems simple enough,yet the way those factors work together is sometimes counterintuitive

jeff jeffy answered 2 years ago
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