“Your weight in gold” has long been an aspiration for many men, and with good reason, as it has been considered to be the most valuable of all metals and indeed, materials.

As early as 2600 B.C, gold has been described as being used by Egyptians as a form of currency, traded between kings & countries.

Over the years, the methods of trading gold have been refined (much like the metal itself) and it is now primarily used for either the creation of various jewelry (roughly 50%) or investments (40%) when a fraction (10%) has various uses in industry.

The uses for gold vary, mostly, by country. India is the world’s largest consumer of gold jewelry, where as China is the largest consumer overall, but its gold is mostly used in various manufacturing industries.

The most common method for determining the price of gold was created around 1919 when London gold fixing came to be. Under this system, representatives of the 5 major gold trading firms hold a phone meeting twice daily and set forth the price per bullion for that time.

Not long after the conclusion of the 2nd world war the Bretton Woods system was established, the system however was relatively short lived and only lasted until 1971 when the US, in what was referred to as the “Nixon shock” ceased the conversion of its currency to gold and transitioned to a flat currency system the last currency to do be separated from gold was the Swiss Franc in the year 2000.

Trade Binary Options

Like most of today’s commodities, the price of gold is driven by the most basic of economic principles – supply & demand, including speculation on both, however, gold also differs greatly from other commodities in such way as quite a lot of it is subject for reuse, repurchase and consumption in other forms – gold jewelry that is once bought is often sold back and finds its way back to be repurposed in some fashion, thus, gold is never truly “consumed”.

While the price of gold is often in direct correlation with that of crude oil, it is often affected by various other factors.

Interest rates are often tied to the price of gold as it earns no interest at all, so when interest rates rise, the price of gold would normally fall, and the other way around, this usually causes central banks to enact policies which while only intended to affect one, also affect the other, for example: if various financial signals in India indicate the possibility of inflation, the central bank may choose to raise the interest, which conversely, will cause a drop in the price of gold, all in order to quell the inflation.

Gold can be traded in a number of forms, each with its own unique set of qualities, these forms include Bars (either 12kg or 1 kg), Coins (usually weighing around 1 ounce), gold certificates and accounts are also available to be traded, as are stocks in gold mining companies.

Possibly the most popular form of trading in gold is found in various exchange traded products – ETF’s (exchange traded funds), ETN’s (exchange traded notes) and CEF’s (Closed-end funds) which are traded in the same way shares are traded on the market.

These forms of trading in gold benefit from not having to deal with the physical “product” however; they have been criticized for having complex pricing structures.

To trade in gold is to have an understanding of international economic indicators such as GDP, inflation, interest rates and energy prices, all of which (but not limited to) have a direct effect on the rise or decline of gold prices.

Another critical factor is the analysis of the yearly supply versus demand, both globally and specific to a country, while the supply of gold is unlikely to radically change in the near future, it’s very nature as a commodity that is at least partially owned by private parties can cause rapid changes in its price, as gold investors choose to increase or decrease their stake in it according to their own needs.

There are several types of trades involving gold binary options, each with its own unique set of variations:

The most basic of all trade types also applies to gold trading, that being the simple High/Low trade in which you have to predict if the price of gold at the end of the set limit will be higher or lower than it was when you started there are other types of trades available such as Touch/No Touch and In/Out trades.

When trading gold binary options, you can use certain world events to your advantage, trading before, during or after those events actually occur.

Let’s assume that the US government has a scheduled announcement on the interest rates for the upcoming month, knowing, as you do, that interest rates often effect the price of gold, you could trade prior to the announcement, essentially “betting” on the interest going higher causing gold prices to drop, or having the Interest being lowered causing the opposite. You could also wait to learn of the new interest rates to assist you in setting a trading strategy in the long term.

In the same way, the knowledge that China has one of the largest holdings of gold can be used for your advantage when you learn of political tension that may cause its government to increase its gold holdings, causing a ripple effect throughout the trading world, affecting prices in a global way. You could choose to act on the news itself or wait for events to be set in motion prior to jumping in the market.

As events like these (or similar) occur on a daily basis, one can make trades and profit any day of the week.

As we explained previously, there are many factors to trading gold successfully and one needs to be shrewd when dealing with it as prices shift direction rapidly, but invest smartly and you too can end up with “your weight in gold”.

 

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