Factors Driving Gold Prices In Trading
Trading gold or gold is one of the most popular investments by the public. This is because trading gold or gold is no less promising than other investments such as saving gold, mutual funds, stocks and bonds. Trading gold has really become a trading commodity, especially in online trading, which is highly targeting volatility or with extreme movements. Trading gold or XAUUSD has different characteristics from other currency pairs, because these pairs have very large movements. So it is necessary to have the right market reading or analysis and with the right entry strategy as well. The advantage of knowing the characteristics of a pair will make it easier to analyze it and of course it will make it easier to take action if it is not in accordance with the analysis. The characteristics of gold have a larger range, so traders must really understand and be careful when transacting whether the market is friendly or turning back from what is being analyzed. Behind all the purposes of using gold, here are some of the factors that drive the price of gold:
Central Bank Reserve
The central bank keeps paper currency and gold in reserve. Bloomberg reports that global central banks have bought the most gold since the US abandoned the gold standard in 1971. According to the World Gold Council, Turkey was the biggest buyer of gold in 2019, followed by Russia, Poland and China. Overall, the government purchased a total of 656 tonnes purchased in 2018.
US Dollar Value
The price of gold is generally inversely proportional to the value of the United States dollar. A weaker US dollar is likely to push gold prices higher through increased demand (as more gold can be bought when the dollar weakens).
Jewelry and Industry Demand Worldwide
According to the world gold council, in 2019 jewelry accounted for about half of gold demand, which amounted to more than 4,400 tonnes. India, China and the United States are big consumers of gold for jewelry in terms of volume. Therefore, the price of gold can be influenced by the basic theory of supply and demand. This is because if the demand for goods such as jewelry, electronics, and all gold-based goods increases, the price of gold will also rise.
Protector of Wealth
During times of economic uncertainty, as seen during times of economic recession, more people turn to investing in gold because of its enduring value. Gold is often considered a safe haven for investors during turbulent times. When the expected returns on bonds, equities, and real estate fall, interest in investing in gold may increase. Gold can be used as a hedge against economic events, such as currency devaluation or inflation. In addition, gold is also seen as providing protection during periods of political instability.
Gold Production
The major players in world gold mining are China, South Africa, the United States, Australia, Russia and Peru. World gold production affects gold prices. Mine production of gold was approximately 3,260 tonnes in 2018, up 7 from 2,500 in 2010. However, despite the increase over a ten year span, gold mine production has not changed significantly since 2016. One reason is that gold is “easy” have been mined, so miners now have to dig deeper to access quality gold reserves.
Gold Trading
The factors that influence the price of gold are quite predictable. Some of the things above are strong factors that affect the price of gold. Therefore, it can be used for trading on gold derivatives. Trading gold derivatives allows traders to make profits both ways, both when prices are down and when prices are going up. If several factors indicate a decline in the price of gold, traders can immediately place an order to sell gold without having to buy it first.
This is because trading gold derivatives only trades the contract, not the physical one. In addition, trading gold derivatives also allows traders to get greater profit potential with a leveraged system. Trading gold derivatives is the right choice with all the flexibility it has.
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