A big topic of discussion in the finance and investing space is the federal reserve. During the depths of the financial recession of 2008 and 2009, the Federal Reserve reduced interest rates to an all-time low of 0.25%. However, we knew that the low rates wouldn't last forever; and all of this year, experts have been talking about when the Federal Reserve is likely to start rate hikes. However, there's a major cloud hanging over financial markets at the moment. Intricate factors of the financial market are starting to collapse; a fact that's most evident when we look into the commodities market. The reality is that no matter if you are talking about oil, gold, silver, or natural gas, chances are that you're talking declines! Today, we'll chat about why the commodities market is declining and whether or not this is a sign that the Federal Reserve will be forced to delay interest rate hikes.

A Strong United States Dollar Weighs Heavy On Gold

The strong United States dollar wasn't expected to last this long; and the fact that it has is is becoming a major issue for the commodities market. The reality is that most commodities are priced in United States dollars. From oil to gold, silver and even cotton, this proves to be the case. While there are a few different opinions as to why a strong dollar harms the commodities market, there's one that will make sense to just about anyone; it's the law of supply and demand.

The law of supply and demand tells us that when supply is high and demand is low, the value of the asset must decline to equal out the levels of supply and demand. The reality is that because commodities are priced by the United States dollar, when the dollar climbs, these commodities become more expensive in other nations. Because commodities are more expensive, demand for these commodities does down; ultimately leading to a supply glut. As a result, we see dramatic declines in the value of commodities; much like we're seeing today.