Gold Trading

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As an expansion to our offerings has extended the possibilities of gold trading. The popularity of gold as a trading instrument has never really declined over the past but it has however increased dramatically lately especially after the currency market has evolved to be so volatile after the recent financial crisis. In the MT4 trading terminal our customers will have the opportunity to both experience gold and silver trading. Traders have the opportunity to diversify or correlate their trades in the forex market with gold futures trading as a way to capitalize on changes of a market less volatile and less proactive in terms of reactions to political and financial instability in contrast to the currency trading market.

Out the entire list of metals that are classified as precious metals; gold has become the most widespread as an investment even though platinum is known to have a larger value as a precious metal which could have been a reason for many investors to think that it would have an equal popularity with gold. Gold investing has managed to receive a reputation for being more stable as a form of investment and is often seen as a safeguard for traders against political and social instability in contrast to other forms of trading. You will often hear people not related directly to the trading scene saying that I bought some gold for my children or people saying I bought gold as a safeguard for a rainy day.

Gold trading – Why it is investment friendly Gold is a valuable, precious and investor friendly commodity for traders to trade with and here are some reasons as to why:

  • Most traders turn to gold trading due to the less volatility it involves.
  • The highs and lows in the financial market rarely have an effect on gold.
  • Gold is globally a common tradable commodity regardless of the country and the currency.
  • The demand is growing tremendously around the world due to the strength and power it holds.
  • Gold can guarantee a wealthy, flourishing trading account.
  • The gold market is consistently changing while its prices fluctuate.
  • There is less risk of price inflation with gold trading.
  • Trading gold does not demand any of your time or presence.
  • Long term and short term trading with gold are considered rather safe.

Gold Trading Prices

If you’re a novice you should understand that although gold is considered to be a very steady form of trading, gold trading prices do float similar to any other form of commodity as they are subject to speculation and subject to similar factors affecting other instruments traded in the forex market including the the laws of supply and demand. In its history gold has been often been considered to be money as it has a an equivalent against most major currencies; since the first quarter of the 20th century the most widespread benchmark used for the price of gold has been the London gold fixing which is in reality a two times telephone conference from key officials of the 5 bullion trading firms in London UK.

Factors Affecting Gold Trading

As mentioned above it is only reasonable to say that the price of gold is subject to a certain amount of volatility as if it was not it wouldn’t be able to be classified as an investment. Gold trading prices are primarily affected by the laws of supply and demand as well as speculation but gold trading prices have one major difference unlike other forms of trading as savings in gold contributes a larger role than what consuming the actual good does unlike other commodities.

Institutions affecting the price of gold include Central Banks and the almighty IMF. Their contribution to the prices of Gold source from decisions of what amount of the precious metal they keep on hand. Central Banks don’t really announce purchases of the precious metal but in many cases purchases of the precious metal or willingness to buy the precious metal has affected the price of Gold to becoming more valuable in terms of exchange against key currencies. It is only realistic to say that the base mechanisms affecting gold are not the only as similar to other trading instruments the price of gold is also effected by artificial price suppression which sources from fractional reserve banking as well as naked short selling of the valuable metal.

How to trade in the Gold Market

Trading in the gold market or the online gold trading market as often abbreviated by more experienced traders of course does not require you to posses real gold on hand as our trading terminal allows both real and demo account holders to engage in gold and silver trading without having to issue a separate gold trading account. The practice of trading gold does not require separate education or training as it operates in the some way currency trading works and the platform allows similar functions when trading gold, silver or currencies.

As far as determining if the price of gold will go up or down we should note that although the gold market is considered as a much more stable market than the currency market, fluctuations do still exist and placing orders which do not enrol a steady trading plan can be very risky. On our forex analysis section we thoroughly explain the different way a trader can start putting down a trading strategy and sharpen it by taking into consideration forex news, forex charts and forex rates.

The gold market also operates 24 hours a day during trading hours and you can easily attach it to your trading schedule as an alternative to currency trading.

The history of gold trading

In the trading industry, you will have gathered that gold is an important material used to trade and is commonly used within businesses.
Gold trading has a deep and long history and this article will explain the steps taken throughout the past that has led gold to become such a widely used investment tool.

The Gold Standard

According to Wikipedia’s explanation, ‘The gold standard is a monetary system in which the standard economic unit of account is a fixed weight of gold. The unit of currency under the Gold Standard is defined with reference to gold. Currency issuers are demanded to trade in notes in that amount of gold. There is no finalised date about when the Gold Standard was established however, Sir Isaac Newton compared the value of silver with gold in his system of measurement in 1717. It is believed by some that this is when the Gold Standard was first founded. Nonetheless, the Gold Standard was not completely official until the 1870s.

The several governments that utilise this fixed unit of account and who trade their notes to other governments are considered to share a fixed- currency relationship. Those who follow the Gold Standard insist that it is rather in contrast to credit and debt expansion. The funds backed by gold cannot be generated arbitrarily by government action unlike a flat currency.

Artificial inflation by devaluation of currency is prevented by the above restraint of the Gold Standard. With this, the credit of the monetary authority is kept firm, ‘currency uncertainty’ is prevented and lending is increasingly encouraged. During the history of the Gold Standard, there were countries that were not fully under the regulations of the standard. For instance, some countries simultaneously used manipulated paper currencies. These countries experienced debt crisis and depressions with the central bank manipulation and inflation of the currency. A typical example of this was during the Panic of 1819 in the United States after its Second National Bank was chartered in 1816. Paper-based currencies became more common and there were political movements against the Gold Standard by the 1890s. The Gold Standard began losing its common use in the industrial nations by this era. The Gold Standard began causing problems when they tried to help the international market. The Gold Standard is no longer in use in any nation as it has been replaced by fiat currency. Only private institutions that provide digital gold currency use accounted gold grams as money.

The Bretton Woods Agreement

Both World Wars and the 1930s depression created major effects on the world finance during the 20th century. Thankfully, in 1944, the Bretton Woods Agreement was established that entailed rules to govern the finance and business relations between several nations.

The Bretton Woods Agreement was initially signed following World War II. It was created in order to manage and stabilize the international Forex market. Bretton Woods Agreement: countries signed to agree that their currencies were to be fixed against the US dollar and an equal rate of gold. The dollar soon gained the top position as a currency. This caused economic power to change from Europe to the United States.

Supply & Demand

In 1971, things began to change in the global economic system and the Bretton Woods Agreement was abolished. The US dollar was no longer exchangeable to gold. Modified financial instruments and the introduction of free trade was formed. This was due to the forces of supply and demand that began to control the currency market.