Gold vs Dollar: Which will dominate the market?

Gold and crude oil have become the hottest commodities in the wake of the global financial crisis brought about by the plunging US economy and collapse of investment banking giants like Lehman Brothers.

Gold and crude oil along with dollar have been dominating the financial news all these days. But which commodity will dominate the global markets?

It is like that that gold will dominate the global markets thanks to the great financial bubbles that the US getting into. Now days the market has shown some volatile signals that when gold is up, the dollar goes down and vice versa. Amid all these, crude oil got modest momentum as it traded higher at major global markets this week.

However because of the volatility in the market, gold dipped below $ 900 an ounce on Tuesday after early buying which propelled the price to a seven-week high; but gold soon lost steam. Now, uncertainties over the US government’s bailout plan may offer support to gold.

Economic analysts express doubts over the strength of dollar as US Treasury Secretary Hank Paulson’s TARP - troubled asset relief program - boosted investment confidence across the world, inspiring some of the biggest one day rises in stocks and equity indices.

They point out that the plan would affect the dollar adversely as it is the biggest currency in the world; it may be difficult for dollar to retain its status as one of the most important currencies in the world now.

|Markets are questioning the potential volume of new US government debt, and the very rapid expansion of the balance sheet at the US central bank, the Federal Reserve. As dollar index hit a low point on 15 July, oil posted its record level of just under $150 a barrel, and gold, which has an especially intimate inverse correlation with the dollar, hit an intermediate peak of $ 977.50 an ounce, close to its March records.

Gold was trading at $895,00 an ounce, down $5,20 an ounce or 0,6 percent from New York’s notional close on Monday, having hit an intraday high of $908,80 an ounce -- its highest level since early August.

However, speculators are taking a bearish view on dollar. That turned gold price from its intermediate low of $ 746.47 an ounce on 11 September, to levels now approaching $900 an ounce.