Shocking Secrets of the Gold Markets!

The price of gold is tied to economic activity. Most of the world’s supply is in the hands of Central Banks, whose main job is to fight inflation. Central Bank managers know that speculators see the price increase as a sign of inflation. So when rallies in the gold market tend to get out of hand, central banks start selling gold from their huge reserves and gold prices eventually start to fall.

This is precisely what happened when gold prices broke the historical barrier of $1,200 per ounce. However, the fact that central banks tend to be gold sellers during gold market rallies does not mean that gold prices cannot rise for a significant period of time. What this means is that the days of direct advances in gold prices are probably not as likely as before. Simply put, gold is a tricky market.

South Africa is the world’s largest producer of gold and accounts for 25% of world production, followed by Russia, the United States, Canada, Australia and Brazil. Two big influences on gold prices are major political upheavals. The political crisis tends to be one of the main reasons for the increase in their prices.

The second is the influence of inflation. In times of high inflation, wealthy investors tend to flee to gold as a safe haven. However, this influence has been reduced due to the management of gold prices by central banks. Now gold and USD prices tend to move in the opposite direction. This negative correlation is not perfect, but it tends to hold for longer periods of time.

There are many exchanges in the world where gold is traded. The most popular is the New York Mercantile Exchange (NYMEX). The second most popular is the Chicago Board Of Trade (CBOT). Gold futures on CBOT have relatively low margin requirements. This makes trading gold futures very attractive to retail traders. The international benchmark for gold is the London Price Fix. London Price Fix is ​​quoted in troy ounces twice daily, known as AM Fix and PM Fix, and is stated in US dollars.

Now the good news is that mini gold futures contracts are also traded on CBOT. These mini gold futures contracts contain 33.2 troy ounces per contract compared to 100 troy ounces per contract. Gold mini futures contracts have lower margin requirements compared to regular contracts. This is the best time to trade gold futures. You can combine gold trading with forex trading. Both protect each other and can be very lucrative.