Gold is the most precious metal and one of the most investment options in the international market. Japan and United States are the leading economies in the world. Both economies are fierce competitors in the international trade market. The economic interaction between these two economies affects the gold prices in a great way. The economic impact of Japanese economy will be analyzed in this article. It has been observed that there are following five ways through which Japanese economy can affect the gold prices in USA.
The Impact of Currency
Japanese Yen and gold prices in USA have a very interesting relationship. When value of Japanese yen improves in the international it puts pressure on the US dollar. This pressure helps gold prices in USA to rise in the international market.
Economic Prospects of Japan
The improvement in the Japanese economy can also affect the gold prices in USA. Japan is one of the largest trading partners of United States of America. Japan is the 4th largest exporter to the USA. Increase in the Japanese exports to USA will put pressure on US dollar. This pressure will help gold prices in USA to rise in the market.
The Importance of Consumer Spending
A consumer spending really matters in the current era of competitive markets. If the consumer sentiments improve in Japan, then its job market also improves and eventually leads to increased incomes, positive growth in Japanese economy and sturdier Japanese Yen as compared to US dollar. This eventually makes the gold prices cheaper for Japanese investors. This encourages them to invest more in the gold and eventually gold prices rise in the market.
Performance of Alternative Assets in Japan
Besides this, the macroeconomics of Japan and its performance of alternative assets like equities and bonds really impacts on the US currency and eventually its gold prices. Improvement in the equity market puts pressure on the Gold prices in USA.
Interest Rates & gold prices in USA
Interest rates and inflation in Japanese economy also impacts the gold prices in USA. Low interest rates in japan force Japanese people to invest more in foreign assets. This forces them to invest more in the safe haven assets like Gold. This increased investment in gold helps gold prices in USA to rise in the international market.
So, it is found out that there are a number of ways that the Japanese economy can impact the prices of gold in USA and its currency as well.