Nowadays world present us with an environment which is excessively noisy and congested. The international markets are often no different.
However, like in life, if you can take the moment to clear you head and focus to understand what traded instrument real are and what drives them, then you can often see a clearer picture.
This is frequently how I approach the markets.
Hi my name is Surrender; I would like you to join ME as I look into discovering the markets. Today’s subject, I will be focus on one of the most traded Commodities in the Forex market and that is GOLD, with the expect that at the end of this video you will have a more of an understanding of the driving factors behind this yellow metal.
Now, there is an old Wall Street saying, “Put 10% of your net worth into gold and expect it doesn’t go up”. As while gold flies, it often means things are going in the wrong elsewhere. However, though this saying actually relates to the physical gold market, today we are looking at the GOLD spot market though this principle can also relate to the spot market, the spot market is in lots of method very different.
Gold spot is a trading instrument which you can trade almost 24 hours a day on the forex market. Unlike its physical counterpart where you have to purchase gold from a licensed distributor or licensed exchange and make arrangements for receiving and storing it and find both a buyer and seller; with spot you are just speculating on the price movements, where if you get the direction right you can advantage from both buying and selling it.
Now one of the 1st things, lots of market analysts will forever say about gold, is that it is a safe haven.
Now a secure haven is an investment that is predictable to retain its value or boost its value during times of market uncertainty.
With this in mind, the market often looks towards Gold when there is a lack in self-assurance in currencies and higher risk assets groups such as Indices.
Due to this, the market often tend to monitor the performance of indices (TXT ON SCREEN: S&P500, FTSE, the DAX, DJIA and the Nikkei), as in the past if they have fallen, you could see GOLD prices rise and vice versa if these instruments have rise in value.
Now though gold is traded against other major currencies, the key relationship has forever been with the USD, which can be dated back to the Breton Woods agreement established in 1944. Though this agreement was ended in 1971, you can regularly see the love and hate relationship between the two. Over the long term, a declining dollar has often meant a rise in gold prices. In the short term, this is not forever true and though there is a particular relationship between the USD and gold, gold is a global commodity and the price of the metal can often reflect the global sentiment, that’s why it has often shined for investors during times of both political unrest and conflict.
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