Gold is one of the most important assets historically, and was the original standard for money globally. Although it’s since been replaced by fiat currencies as a monetary standard, it remains a highly sought investment and is becoming more popular today as inflation runs rampant. But what exactly is fueling Gold prices today? Let’s take a look at what factors influence gold prices and why to trade it with PXBT, a regulated broker with exposure to the Gold market.
What is Gold used for?
Aside from being an investment, Gold is used in jewellery all over the world – from rings to chains and watches and much more. Thanks to it being a great conductor of electricity, Gold is also used in electronic circuitry. Gold even has dental applications, is used in the aerospace industry, and in medicine to treat arthritis and certain types of cancer.
Gold is also the first choice for investors who are seeking to hedge from inflation, during times of economic or political distress, or as a way to diversify away from soft assets into hard assets.
What factors drive Gold supply and demand?
Ultimately, like all Commodities, Gold prices are driven by supply and demand. When demand overwhelms supply, Gold prices grow. However, this balance is affected by a variety of factors, which we’ll explore below.
Inflation
Inflation today is a critical topic amongst investors. As inflation rises, the value of paper currencies diminishes. Gold is used to hedge against inflation due to its relative scarcity and finite supply.
US dollar strength
Gold is priced per troy ounce against the US dollar. This means that when the US dollar is strong, Gold prices can struggle. Conversely, when the US dollar is weak, Gold tends to exhibit extraordinary strength.
Economic data
GDP growth, the job market, and other economic data can impact Gold prices. When these metrics suffer, Gold is often used as a safe haven for hedging.
Central bank reserves
Central banks hold Gold reserves. The buying or selling activities of central banks can increase or decrease confidence in Gold as a safe haven asset, impacting prices.
Mining
The cost to produce Gold via mining can also have a dramatic impact on Gold prices. Governments can set policies that limit or encourage Gold mining, increasing or decreasing available supply. Technological advancements in mining can also bolster how much Gold is extracted, increasing supply.
Market speculation
Not only do retail investors buy up Gold bars and coins, or purchase shares of Gold ETFs, but large hedge funds also take long or short positions on Gold. This type of speculation can have both short- and long-term implications for Gold prices.
Global crises
Recessions, pandemics, and other major global crises can cause investors to flock to Gold investments due to uncertainty of other investments holding their value.
Why trade Gold CFDs with PXBT
Owning physical Gold comes with great responsibility and risk due self-custody. Gold also takes up a lot of space and is often counterfeited. For these reasons, trading Gold CFDs with brokers like PXBT are especially appealing.
With the CFDs offered at PXBT, there is no need to own the underlying asset, yet investors and traders still can speculate on Gold prices through long and short positions.
PXBT is a safe, regulated trading broker which offers powerful trading tools based on MT5 technology. In addition to Gold CFDs, the broker offers a wide range of markets such as Metals, Commodities, Indices, and Forex currencies, all with favourable trading conditions like spreads from 0.1, up to 1:1000 leverage and 24/7 support.
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Disclaimer: The information provided herein is for informational purposes only and does not constitute personal recommendation and/or investment advice. Past performance is not a reliable indicator of future results. The financial products offered by the Company are complex and come with a high risk of losing money rapidly due to leverage. These products may not be appropriate for every investor. You should carefully assess whether you understand how these leveraged products operate and whether you can tolerate the high risk of losing your money. PXBT Trading Ltd does not serve clients from Restricted Jurisdictions as listed on its website.
