Trading Gold

Looking at the historical performances of gold investments, it does seem that it is the only commodity that has an inverse relationship with the economy, meaning that when the economy of the world goes south, the prices of gold increase. Another fact that can be observed with gold investments is the fact that gold prices have retained their value for a record 5,000 years.

Investors have been gradually turning to the precious metals market due to the increased confidence level in gold as market watchers anticipate increase in gold prices which is being kept at bay by new fiscal policies by economies such as China, India and the United States that are bent on keeping gold prices at steady levels to avoid market panic.

What needs to be known here is that the precious metal market is not like other commodity markets for different reasons and one main reason is the fact that most investors who invest in gold do it for the long run and seldom buy or sell gold or their precious metals holdings unless it becomes absolutely necessary. Uncertainty has already arrived with the surging dollar and the recent interest hikes coupled with commodity slumps which in turn bore down on the precious metals industry last year with gold prices dropping by 10 per cent as silver slipped down by 12 % and stemming from the VW emission scandal platinum dropped by a whopping 26%.

Although investment demand for gold was average as investors preferred bonds that yielded higher returns, the reason gold prices reacted negatively was largely due to SPDR Gold fund which just happens to be the largest gold ETF on the planet and when their holding slumped, so did the confidence of bullion investors with most being unsure about which direction gold will go in 2016 as the Fed prepares to continue scheduled rate hikes over the coming months, although this may fuel gold selling, there are other forces at play that also have the potential of the direction gold will go this year and that is the value of the dollar.

Gold prices are in most case scenarios correlated to the dollar negatively or inversely and market players are expecting the greenback to strengthen further this year due to the rate hikes, however if there any delays with the scheduled hikes (second hike expected in March) citing uncertain or negative economic conditions the dollar will lose momentum and when this happens it will definitely be a boost to the prices of gold.

The fact that gold is at the current prices, for the average gold buyer who is looking at long term gains, buying gold and silver at current prices would give them a huge advantage in the future based on the fact that the dollar will fall (as it always does after it makes its run) and the prices of gold, silver, platinum and palladium are destined to sky rocket in the very near future – it is only a matter of time.