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Gold and Currency Market Relation

In: Business and Management

Submitted By qusay2000
Words 1244
Pages 5
Foreign Exchange Market
 FX, forex, or currency market) is a form of exchange

for the global decentralized trading of international currencies.  Virtual
 No one central physical location that is the foreign

currency market  Exists in the dealing rooms of various central banks and large international banks and corporations.  The dealing rooms are connected via telephone and computers

 The foreign exchange market assists international

trade and investment by enabling currency conversion.

Exchange Rates
 Trading on the Foreign Exchange Market establishes

rates of exchange for currency  Exchange rates are constantly fluctuating on the forex market as demand rises and falls for particular currencies, their exchange rates adjust accordingly  Instantaneous rate quotes are available from a service provided by Reuters

Gold Standards
 A monetary system in which a country's government

allows its currency unit to be freely converted into fixed amounts of gold and vice versa.  The exchange rate is determined by the economic difference for an ounce of gold between two currencies  It was premised on three basic ideas:
 A system of fixed rates of exchange existed between

participating countries  Money issued by member countries had to be backed by gold reserves  Gold acted as an automatic adjustment

The Fall of Gold Standards
 With the Great War the gold supply continued to fall

behind the growth of the global economy  The British pound sterling and U.S. dollar became the global reserve currencies
 Smaller countries began holding more of these currencies

instead of gold.  The result was an accentuated consolidation of gold into the hands of a few large nations.

 The stock market crash of 1929 was only one of the

world's post-war difficulties, that forced England to suspend the gold standard in 1931 leaving only…...

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