GOLD, CFD TRADING AND HISTORY – CAPITAL STREET FX
13 Nov 2022
Before getting to know about the past years in gold CFD trading let us know about what gold CFD trading is and how does it work. (CFD) is contracts for difference and in gold, CFD are temporary orders to buy/sell a pre-stated amount of gold. Profits and losses are determined by change in gold price while the contract is active. All CFD`s have a contract duration. Gold trading via CFD`s is based on the idea of speculating on the price of gold. When trading gold as a CFD, as with other assets you can buy in both rising or falling markets.
BRIEF HISTORICAL BACKGROUND
Approximately 65% of all the gold in the world has mined since 1950 and the finite of supply of gold adds to its rarity and attraction. But how did it all begin?
For most of the early 20th century, Americans were forbidden to buy or trade gold. In 1946, The Bretton woods agreement fixed the price of gold at $35 an Ounce, by creating a gold standard and the USD became backed by gold. A gold standard is defined as a monetary system in which the standard economic unit of account is fixed of mass of gold.
Later in 1971, the Bretton Woods system was abandoned when there was no longer enough gold to cover all the paper money in circulation. The USD became “fiat” currency was backed by nothing more than the health of the US government. In 1974, the ban on US ownership of gold bars was lifted and US citizens were allowed to trade gold.
The end of the gold standard ushered in the current system of floating exchange rates. In 1972, the Chicago Mercantile Exchange (CME) launched futures trading in seven currencies and in 1974 the first gold futures contract was traded on the COMEX exchange in New York. The 1990`s experienced a sharp expansion of over-the-counter trading in currencies and gold and the beginning of online trading.
DIFFERENT INVESTMENT MODE AVAILABLE
Given below are some basics points about the different modes available-
- Stocks In gold mining companies
- Gold ETFs
- Gold mutual funds.
LEADING GOLD PRODUCERS:
Top gold producers’ countries.
LEADING GOLD EXPORTERS:
Below are the countries that exported the highest dollar value worth Of gold in 2021.
1-Switzerland: $86.8 billion (22%)
2-United Kingdom: $41.4 billion (10.5%)
3-Hong Kong: $30.8 billion (7.8%)
4-United Arab Emirates: $28.7 billion (7.3%)
5-United States: $27.7 billion (7%)
6-Australia: $17.5 billion (4.4%)
7-Russia: $17.4 billion (4.4%)
8-Canada: $15.1 billion (3.8%)
9-Singapore: $15 billion (3.8%)
10-Peru: $7.7 billion (2%)
WHAT FACTORS AFFECT GOLD PRICES
The sacred yellow metal is considerable to be in a safe investment for long run. But still, the price and volatility of gold cannot be dropped out of question. Here are some factors which can affect gold prices.
2- Gobal movements
3- Gold reserve
4- Jewellery market
5- Rate of interest
6- Effect of Rupee-Dollar condition
7- Future gold interest
8- Weak dollar.
WHY DO GOLD PRICES FALL AFTER ACHIEVING RECORD HIGH
Market conditions, speculations are one of the main reasons for changes in gold prices. Invester speculate as to what governments and central banks are going to do and the act accordingly.
- Rising dollar
- Rising in interest rates
GOLD FUTURES TECHNICAL ANALYSIS:
Gold futures is currently trading at 1706.9, has taken support from same level 1621.10 and it created triple bottom pattern, currently it is in uptrend.
For going long buy above 1728.92.
HOW TO TRADE GOLD USING CFD`S
Trade gold CFD is more flexible than the other ways. CFD is a financial tool which is popular form of derivative trading. This type of trading involves speculating the price of gold spots. You have options to go long or short the gold price. The profit you earned is the difference between the buying and selling price.
The biggest advantage of gold CFDs is that it has no expiration date. The contract is closed when there is a reverse trade made and the trader realizes his/her profit or loss.