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On October 12, according to US media reports, US Navy officials said on the same day that the US Navy dismissed the commander of the USS Wyoming (SSBN 742) ballistic missile nuclear submarine this week. The US Navy issued a statement saying that the commander of the Navys 10th Submarine Squadron, Rear Admiral Bob Worth, dismissed Lieutenant Commander Robert Moreno, who led the "Blue" crew of the USS Wyoming nuclear submarine, because of "loss of confidence in his command ability." US media said that the military usually removes commanders from their posts due to loss of confidence, but does not provide specific reasons for dismissal. The US Navys statement did not provide more information about the decision to remove Moreno, and a Navy spokesman declined to provide further details. The statement read: "Navy commanders must adhere to high standards of personal and professional conduct. They should uphold the highest standards of responsibility, reliability and leadership, and if they fail to meet these standards, the Navy will hold them accountable."According to TASS: Russian air defense forces shot down 32 Ukrainian drones at night.On October 12th, French Prime Minister Jean-Claude Le Cornu, who was reappointed by French President Emmanuel Macron as Prime Minister on October 11th local time, stated during a visit to a police station in the Paris suburbs that he currently only wants to focus on resolving Frances political crisis. Given the deep political divisions within Frances political parties, he could be impeached by the National Assembly at any time. Le Cornu declined to specify when he would form a new government or its potential composition, but did indicate that it would not include anyone interested in running in the 2027 presidential election.On the evening of October 12th, local time, Wilders, leader of the far-right Dutch Freedom Party, posted on social media that the Dutch National Intelligence Service had officially informed him that he was being targeted by a terrorist organization. As a result, he had decided to suspend all campaign activities. The Netherlands is set to hold parliamentary elections on October 29th, and Wilderss far-right Freedom Party is currently leading in opinion polls. According to multiple European media reports, the terrorist organization also orchestrated the recent attack on Belgian Prime Minister Thomas de Weve. The Belgian government has arrested two suspects in connection with the case.On October 12, according to the Russian Satellite News Agency, the Afghan Ministry of Defense issued a statement saying that in response to repeated Pakistani airspace incursions and airstrikes, Afghanistan had carried out retaliatory operations against Pakistani security forces along the border. The statement said, "The operation successfully concluded at midnight." The report also warned that "if Pakistan violates Afghan airspace again, the Afghan armed forces will resolutely retaliate to defend the border." Reports indicate that Afghanistan began striking Pakistan on the evening of October 11 in response to attacks in Kabul and Paktika Province in the early morning hours of the 10th. According to Afghanistans Dawn News Network, the conflict between Afghanistan and Pakistan has resulted in the deaths of 12 Pakistani soldiers. Reuters also reported that Pakistani security officials alleged that the Afghan side launched unprovoked attacks, with the two sides exchanging fire at more than six locations along the border.

The relationship between gold and dollars

Eden

Oct 25, 2021 13:27

The relationship between Gold and the US dollar has a long history. Before the current fiat money system, the value of dollar was tied to the specific amount of gold under the Gold standard. The gold standard was used from 1900 to 1971. It ended in 1971 when US President Nixon no longer allowed the Fed to redeem dollars with gold. Eventually, the US government decoupled the value of the dollar from gold altogether in 1976. Consequently, Gold moved to floating exchange and this made its price vulnerable to the dollar’s external value.

The correlation between gold and dollar has been pretty much inverse since then with exceptions during certain periods. In correlation, a direct relationship means that value of two assets moves together while inverse means that they move in opposite direction. To simply explain the correlation, when the value of the dollar increases relative to other currencies around the world, the price of gold tends to fall in dollar terms. It is because gold becomes more expensive in other currencies. As the price of any commodity moves higher, demand recedes. Conversely, as the value of the US dollar moves lower, gold tends to appreciate as it becomes cheaper in other currencies. Demand tends to increase at lower prices. In 2008, the International Monetary Fund (IMF) estimated that nearly half of the moves in the gold prices since 2002 were due to dollar. A 1 % change in the effective external value of the US dollar led to more than a 1 % change in gold prices.

The relationship between the value of the US dollar and gold is also impacted by Interest rates. Since Gold does not yield interest in itself, it must compete with interest bearing assets for demand. When interest rates move higher, the price of gold tends to fall as it costs more to carry the metal. Higher interest rates in the US would help the dollar to appreciate and hence lead to decline in gold prices. Similarly, lower interest rates would lead to a reduced opportunity cost for holding gold and help gold prices move higher.

This was evident after the 2008 crisis when the Fed conducted a series of rate cuts and Fed Fund rates moved towards zero. Gold prices performed exceptionally well during that period and made a lifetime high of around $1900/oz.

Now as Fed is moving towards increasing rates further and unwinding its balance sheet, the pressure on gold prices is evident as the dollar is gaining strength.