What are some effects of using gold and foreign currency in open market operations?

Answer 1

Gold would be self-explanatory as it used world wide as a medium of exchange. If, I not want your money, I will take Gold. But, daily price changes for gold do play a role and work similar to what I explain next.
Foreign Currency is a little more complicated. Say you buy a "Widget" from Europe for $10 EUR. The American dollar is worth less, so, we will say this will cost you $11 USD once you convert the money. OK, now you buy your Widget, but, payment is not due until it delivered. Since currencies change almost by the minute. You may see the EURO Dollar become more strong. What happening, you losing money because now when the widget is delivered it will cost you $12 USD to convert to the $10 EUR. So, what your company do is Hedge their money and buy Euros at the time they make the transaction to cover fluctuations in the difference in Euro dollars and American dollars. This the only effect I really know and may not have explained it well. But, in the open market money changes and the effects are a product you buy can cost you more in currency exchange when the deal finalized.
Example; Osama Bin Laden; the USA tried to freeze his bank account, but, they were slow and he had taken the money and bought Diamonds. Heck, he can now carry around millions in his pocket and have no trouble buying what he want. Diamonds are negotiable worldwide, just like gold. I not want your money, I take your diamonds too. ;-)

Answer 2

ok, open market ops? as in what the fed or other central banks do when they intervene in markets? in that case, official insititutions (central banks and treasuries) and non-officials (major corps, banks, extremely large private capital) can enter markets and flood them... this flooding of capital is intended to push the currency or commodity (like gold) one way or the other...

example - the Bank of Japan - the last thing that it really wants to see (besides godzilla) is a strong Yen (Japan's currency) so they will sell Yen in open market operations in order to oversupply the market and keep the Yen artificially weak...

the BOJ has done this on a regular basis for years

Answer 3

money is completely a nominal valuation of issues. the cost of a unit of money is beside the point to the properly worth of that it particularly is being priced. If a automobile in Japan expenses one million yen, and the customary eastern worker makes 5 million yen a year, then a automobile expenses one million/5th of a year's wages. If a automobile in u.s. expenses $10,000, and the customary American worker makes $50,000 a year, then a automobile expenses one million/5th of a year's wages. the two workers are making the comparable volume in terms of vehicles - 5 vehicles a year. The forex they used to particular the properly worth of vehicles while in comparison with wages makes no distinction.