Investing in Gold and key price drivers have become the talking point lately among those who are involved in monetary markets. The recent surge of gold prices is being witnessed by the whole world. And many can’t wait to get themselves in this sector. However, there are many factors that you need to know about the market before you invest in it.
So how should we invest? Well, as you might already know, large buyers and official stockholders normally buy the metal from giant banks. London is the center of the worldwide spot gold market, having more than $33 billion in trades which passes through the city’s payment system each day. Taking into consideration the need to avoid security risks and cost, the bullion is usually not moved physically and deals are therefore cleared through paper transfers. But London is not the only significant market for physical gold as there are many others in India, China, the Middle East, Turkey, Singapore, Italy and the United States.
Stockholders can also enter the market through future exchanges, as people trade in contracts to sell or buy a specific product at a stable price on a particular forthcoming period.
China, India, Dubai and Turkey, all have launched futures exchanges.
Key price drivers
Investors: The ever increasing interest in supplies, including gold, from asset funds in current years, has been a chief reason behind bullion’s march to momentous anticyclones. Gold’s robust presentation in modern years has fascinated more companies and augmented influxes of currency into the general market.
It is very much obvious that Gold is a prevalent border against currency market instability. Because if we look in more closely, we can see that it has moved in the contradictory way to the US dollar as there is weakness in the US unit.
Experts say that the strong performance of gold last year was largely driven by distresses over the steadiness of all currencies, even though main economies have progressed to reduce strength in their currencies to defend exports.
Gold has historically had a correlation with crude oil prices, because the metal can be used as a hedge against oil-led inflation. Strength in crude prices can also boost interest in commodities as an asset class.
More recently this correlation has weakened, with gold prices hitting a series of highs in the past two years while oil prices retreated from record peaks, though both have been boosted this year by Middle East unrest.
Fiscal and political tensions: The priceless metal is extensively regarded as a benign harbor, bought during ambiguous periods during the step towards quality. The recent financial market uncertainty in Greece has added a great deal to boost the inflows to gold.
That being said, geopolitical events, such as the current outbreak of unrest across the Middle East and North Africa, can also bring price rises. Trading of gold by central banks which hold gold as part of their reserve can also bring about an increase in the price.
To conclude, one has to realize the fact that Gold is not used up as is in the case of oil or copper. Even though there are certain periods where India and China exert some influence on the gold market by consuming gold in bulk, the dollar and financial risk are what that holds more significance when it comes to Gold market.