The preservation of value

Traders prefer gold investments, when markets are volatile and dominated by economic or political instability. Economic turbulence has traditionally influenced by the growth in the value of precious metal, as investors assess it's a safe investment. The instability times caused by higher demand and interest in gold, which means an even greater increase in value. These market developments offer great potential for greater earnings opportunities for trade.
"Gold always become more expensive", concentrate on detail and uncover the gold trade opportunities, and how to actually make a profit from it.


Why traders invest in gold?

For a long time gold for traders are very appropriate financial instrument. This is a high-value product, which is not related to any specific markets, countries or some companies. That's why investors sell gold in order to compensate for thei'r fails, resulting from various economic circumstances.
Gold market is the global OTC (over-the-counter) market. New York Mercantile Exchange Comex division and the London Bullion Market Association are the two largest gold trading places in the world. Like any other financial instruments, the gold price is set by supply and demand. People tend to build up stocks of economic and political turmoil times. When you buying gold, supply decreases, but demand increases and the price going up.



What makes the gold market move?

  • Financial turmoil
Traditionally, gold is considered a safe investment in times of financial turmoil. If the market for whatever reason are unstable, the price of gold rise, because it's considered to be an ideal tool for insurance, in such conditions. The reason for this is the realization that precious metals will obtain better value, than the less reliable market values ​​of financial instruments. For example, currency or shares that may suddenly fall down, following the publication of bad market data.
  • Inflation
Investing in gold is also a great way to hedge against inflation. Gold has a negative correlation with the interest rate, which means, that rising inflation and interest rates fall, the price of gold to continue to increase, because it attracts dealers, who make a profit from investments in other financial instruments.
  • Government debt
High government debt may adversely affect the currency markets, because traders will turn to gold. Trade gold acts as insurance against currency devaluation, which happens when central banks pursue quantitative stimulus policies to increase liquidity and reduce the national debt.
  • The geopolitical risk
Another factor, that increases the demand for gold - it increased geopolitical threat to the world. When there is political unrest, as in the recent events in Ukraine, Russia or Iraq, traders running to the gold market, because they are afraid that political changes or instability in the country, may adversely affect their earnings and seeking refuge in safer assets, in order to compensate for their losses.



How is the price of gold set?

The price of gold is measured by it's weight. Precious metals market weight in different ways. One of the most common measures of troy ounce is equal to approximately 31,1 grams. As traders terms, if the gold price is 836,90 USD, which means that one ounce of gold cost 836,90 USD.
Gold is valued in USD and a movement in the opposite direction of the currency. If the dollar weakens, it positively affects the demand for gold as international investors think, that they will get more of the exchange rate, and if the value of the dollar rises, the price of gold will fall. For this reason, investors purchased gold as protection to balance their profits and losses. In addition, gold tends to keep its purchasing power over time. Traders can buy gold to reduce the impact of changes in currency values.
In forex market gold is a form of currency and the main driving force of the market. Internationally recognized as the gold code is XAU. Since gold is neutral, that is, not associated with a particular country, the increasing asset prices affect the various currencies. Higher gold prices can be especially important for the major currencies, gold-supplying countries. Canada is the world's third largest gold-taker, but Australia is the third largest gold exporter in the world. So, if the trader believes that the price of gold will rise, he can buy a Canadian or Australian dollars, as this currency is likely to "grow".


How do I trade gold CFD?

Traders deal in gold, with the financial contract for differences (further - CFD), granted to use leverage. CFD is an agreement to buy or sell a certain quantity of gold at a predetermined date. Such transaction gains or losses are caused by these measures price changes. CFD provides a golden opportunity for traders to speculate and your trading portfolios, the physical volume of gold without, however, enjoying the same benefits, as if they should.
Trade in gold stocks is a very common, they are characterized by high liquidity. The most popular way to trade CFDs - by pressing the gold price (spot), vol. y. according to the quoted price at which the instrument could be bought or sold at a specified time and place. To understand the emergency gold price model, we assume that the recent gold market was very active, and you think that will continue to dominate the market bulls, so you decide to enter into a transaction. Immediate price of gold is at 962,1 to 962,8 You buy 20 gold CFDs at 962,8 Point size is 0.1, so if gold "moves" from 962,8 to 963,8, which equals 10 points. 1 item consists of 25 US dollars, because the contract size is 250 troy ounces. The base currency is the US Dollar. Over the next few days you can see, the gold price has increased even more and now quoted at 975,1 to 975,8. You decide to close your position and sell gold at 975,1. Your net profit is:
975,1 to 962,8 = 12,3;
12,3 means 123 points;
123 points x $ 25 = 3075 USD;
3075 USD x 20 = 61,500 USD.

Some traders believe, that they can make a profit from gold, when the price increases, so they buy it to "push" the price up, and then sells and takes profits. Others sells gold, when they believe, that prices will fall and then re-purchase it. There are also those, who believe that it's better to buy gold when its price decreases. Thei'r logic is based on the fact, that the price will rise again later and then, when that happens, they will earn higher profits.
No matter what's your strategy and whatever reason you decide to trade in gold, the fact is that, gold can earn you quite a decent profit.

GOLD FACTS

By the 2014 year World Gold Council data were extracted total of 177,200 tons of the yellow metal.
17,2 % gold belongs to the world's central banks.
It's believed, that in the earth still is 40,000 to 50,000 tons of gold.
Largest gold reserves by country:
1. United States - 8133,5 tonnes.
2. Germany - 3384,2 tonnes.
3. Italy - 2451,8 tonnes.
4. France - 2435,4 tonnes.
5. China - 1051,5 tonnes.


Good luck and green pips!
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