Invest in Gold and Precious Metals with FXPro
Spot precious metals are very popular trading products and are undoubtedly a good choice for investors who tend to be safe in their portfolios.
Gold is often seen as a safe haven for traders during times of economic uncertainty.
Start trading gold with FxPro and diversify your portfolio.
You can trade gold on our MT4, MT5 and cTrader platforms.
Drag the chart above to view real-time buying and selling prices, values, and historical performance and volatility of spot precious metals.
The above information can help you make an informed decision when buying and selling gold. Before trading with a live account, you can also try to open a free demo account for practice.
If you want to diversify your portfolio, open an account with FxPro today to start trading gold.
Successful investment in precious metals
Since ancient times metals like gold, platinum, and silver have been a stable source of finance for people, especially in times of uncertainty. Wars start and end, times change, but metal is still the safest asset to invest in. Why are they so popular with investors? Let’s find out.
When you plan to invest in gold, don’t think you will buy or sell its physical form. You will make a transaction operation with the price of gold. It may be influenced by various factors and reflect global changes in the market. let’s find out why to choose gold for the investment strategy.
“Precious metals” taken part in financial markets for a long time. In antiquity, it was even used to support fiat currency. During the gold standard period, paper money had to be backed up with an amount that matched gold as a reserve.
From the 1980s to the early 2000s, interest in precious metals was very low due to rising stocks and strong and stable economic growth. that is why prices are adjusted to range from $300 to $500 in that time period. Interest in gold investment has started to grow since the global economic crisis in 2009. The price even reached $1,907 in August 2011. The US economic recovery as well as the Fed rate hikes since 2013 weakened gold, but the precious metal continues to attract investors’ attention.
So why do investors choose gold?
- It is the safest asset because it remains stable in times of uncertainty, including downturns in investment markets, huge sovereign debt, currency weakness, high inflation, war, and social uncertainty;
- The history of the gold standard has made gold assets act like currencies rather than commodities;
- Gold acts as a subject of speculation;
- Gold is universal: durable, can be carried anywhere and accepted anywhere.
Factors that affect the price of gold
Unlike major currencies, gold is not supported by levels of employment, production, and infrastructure. Can be compared with other assets such as oil or corn because it has physical characteristics. But the price of gold can also act on its own based on demand and supply. Below we describe the most important drivers for gold prices.
- Central Bank Reserves. Central banks hold gold for diversification purposes. Gold can also be used to fund emergency liquidity or currency intervention. In addition, the central bank also pays attention to the economic conditions of the country when deciding to buy or sell gold. For example, if the central bank decides to diversify its monetary reserves, the price of gold will rise.
- Avoid risk. Sentiment in the equity market also plays an important role for gold prices. If the dynamics of risk is reduced, investors are more inclined to sell stocks and turn to gold which is safer and more stable.
- Central bank interest rates. This is a historical factor that affects the price of gold. When interest rates are set at a low level, investors will turn to alternative investments, namely gold, which promises more positive investment returns.
- US dollar dynamics. Since the price of oil is in US dollars, there is a very large inverse correlation and it moves in different directions. If investors sell USD to the market, then gold becomes more attractive and the result will be more expensive. the alternative is if the US dollar strengthens then gold prices tend to fall. But you have to understand that it does not happen in all cases but mostly occurs during a crisis and economic uncertainty occurs.
- Inflation. The consumer price index tends to be directly correlated with changes in gold prices. If inflation is high then investors will look for assets that are more reliable and “solid” and usually choose to invest in gold. On the other hand, if economic conditions are good, the demand for gold will decrease and asset prices will be cheaper.
- Gold producing country. Political instability in gold-producing countries as well as sanctions imposed on them can affect the level of gold production and the result will increase the price of gold. However, because there is no official document that can represent production levels to investors, this factor is the least informative for investment purposes.
Silver is the second popular metal for investors. Like its brother gold, silver has been considered a currency for a long time. For example, British pounds are called pounds because they are equivalent to one pound of silver. Most of the factors that affect the price of an asset are the same as those that affect gold, but there are slight differences in the level of volatility. The price dynamics are almost similar to that of gold, but the volatility of silver is lower than that of gold.
Platinum is the rarest meta that is used for financial purposes. The price is influenced by industrial demand and mining process. Its production is only found in a few countries when compared to gold, but the volatility of platinum is higher than other metals. Moreover, platinum is also more affected by the uncertain world situation than other metals.
In conclusion, investors choose metals as a safe asset during periods of uncertainty. They can provide more stable profits and are less affected by changes in the market.