Usually, when the value of the dollar drops, the current gold price goes up. But what does this really tell us?

At present, most foreign currencies are still linked to the U.S. dollar. The U.S. dollar is devalued when the U.S. money supply is increased. When other countries devalue their currency in an attempt to stay in proportion with the U.S. dollar, the spot price of gold may increase–but the value can be skewed.

Acute or intentional market manipulations can affect the price of gold, but that price may not be an accurate reflection of the value of gold. As we know, price (what we pay) and value (what something’s worth) are two entirely different things. As this pertains to gold, what you pay right now doesn’t necessarily give you a clear picture of the investment value.

The spot price is the current gold price a buyer pays in order to purchase and receive gold right now. Basically, it’s the “cash price” to make a transaction right now. In contrast, the “forward price” is what’s paid by a buyer to set a price for gold that will be purchased and delivered at a later date.

Spot prices are used to predict the future prices of numerous commodities. But what happens when an acute or intentional actions cause a fluctuation in the market?

Regarding economic fluctuations that are caused by devaluation of the U.S. dollar, some analysts say this causes the spot prices of gold to be much less useful in predicting gold’s future market performance. Also, this value become less useful in analyzing gold’s value as as investment.

For determining investment value, analysts often focus less on the current gold price and instead point to historical gold prices. For decades now, the price of gold has steadily increased, regardless of socioeconomic conditions.

When it comes to market predictions, the current gold price has to be looked at in the context of what’s going on in the regional and global economic market.