Gold rush

The credit market crisis of the past few months has negatively impacted on the dollar, but what is bad for the dollar is good for the gold price, which has surged to its highest level since January 1980

Over the past few months, credit markets have experienced the worst crisis seen for decades, driven by losses in the banking sector arising from loans made in the sub-prime housing market. In a bid to ease the ensuing credit crunch, the US Federal Reserve Bank pumped huge amounts of liquidity into the banking system and cut the Fed Funds rate, its main lending rate, by 50bps. All this has negatively impacted on the dollar, which has fallen to a 15-year low on a trade-weighted basis. By contrast, this activity has been good for the gold price, which has surged to its highest level since Ja...