Understanding Gold Price Movements

Recent political events have seen an upsurge in gold prices and brought trading in the precious metal sharply into focus. Before jumping into the gold market, it makes good sense to have a broad understanding of the factors that influence the price of gold, so that you can make intelligent informed decisions about buying and selling the commodity.

People have been buying and selling gold since the dawn of civilisation and today gold trading is still a key component of investment and trading strategies. Gold is seen as a safe secure investment that will always retain some real value. The precious metal remains rare and gold production in the world while steady is not likely to change the relative scarcity of the metal in the foreseeable future.

The scarcity of gold and its commercial value make it a secure investment in real terms although its value can rise and fall in line with a range of economic, political and social factors. These factors include:

  • Uncertain economic and political times can cause investors to seek security by investing in gold. Recent political events like Brexit and the US - China trade war are perfect examples of events that cause investors to seek the security of investing in gold. These market responses occur regularly when the geopolitical times become uncertain - Russia’s decision to move into the Ukraine sparked upward pressure for the gold price. For this reason, gold is often called a crisis commodity.
  • Interest rates also can affect the Gold price. Low interest rates generally see the gold price rise, while when interest rates rise investors tend to move their funds out of gold and into higher yielding deposits.
  • Central Bank’s hold gold reserves as part of their portfolio -when economies are humming along, they tend to sell off some of their gold reserves (as gold does not produce an income dividend) - this tends to have a negative impact on the price of gold. When economies are sluggish, Central Banks often begin to build their gold reserves, which causes upward pressure on the gold prices. In recent times, many central banks have been purchasing gold.
  • Economic data particularly US economic data can influence the gold price. Reports that indicate an economic downturn may be looming or that intervention by the Federal Reserve is likely can cause investors to buy or sell gold depending upon what the data indicates may happen.
  • The price of the US dollar. When the US dollar falls, the price of other currencies and commodities is likely to rise and vice versa.
  • Supply and demand. Gold is not consumed, although some is used industrially, most of it that was in existence 5000 years ago is still around today. However, much of it is held onto rather than traded making the supply of it rather limited.
  • Central bank intervention through quantitative easing - quantitative easing tends to cause the gold price to rise.

There are many competing factors that can affect the price of gold and while the current price rises can make it tempting to jump into the market, it is best to gain an understanding of the fundamentals that affect the price before doing so. USGFX provides you with the ability to trade in gold and provides you with daily market updates and free signals on gold trading. If you want to get into the gold market there is no better place to get quality information and access to he best trading platform.


Source   Presented by USG
A brief history of Forex

When you think of forex today, you likely conjure up an image of a flat-screen digital device full of real-time figures, fluctuating graphs, notifications...

How do Forex trading algorithms work?

Up until the 1970's foreign currency trading was conducted over the phone by primarily institutional investors. In what was a relatively closed market there was very...

Can I Make Forex Trading into a Fulltime Job?

Forex trading can be a rewarding and profitable profession. Like any profession it takes practice, persistence and an ongoing education program. The first thing to...


How much do you need to know to trade forex

Gaining access to forex trading platforms is relatively easy and it is possible to begin forex trading without any preparation or knowledge...

Ten Fun Facts about the Forex Market

The Forex market operates twenty-four hours a day with markets open across the world. The market continues to grow in popularity...

Importance of Patience in Forex Trading

There is a Chinese proverb that says, “One moment of patience can ward off great disaster. One moment of impatience can destroy a whole life...


Impact of Oil Supply on Forex Market

The modern economy is powered by oil and most economies are heavily reliant upon a regular supply of oil. Economies that need to import their supplies of oil...

The Importance of Trading Psychology

Perhaps the most important aspect of Forex trading is not mastering the technical skills but understanding and controlling the psychology of trading...

Trading terms every trader needs to know

Entering the trading world for the first time can be a little daunting. Even the language appears foreign. People talk about spreads, pips, bears, bulls...

Top 10 Forex Brokers 2020

200+ Forex Brokers
TOP 10 Best Forex Trading Platforms
Best Forex Platforms 2020

A variety of web terminals and specialized software makes a choice of a trading platform a difficult one for a novice trader. What should be this vital decision based on? To begin with, it is necessary to highlight the main criteria that high-quality software must meet for making money on financial markets...

Top 10 Forex Platforms 2020

All Forex Platforms