Gold is a shiny, malleable metal that also happens to be a favorite among investors. Known as a safe haven investment, Gold tends to fall in value when market conditions are good and increase in value under negative economic and market conditions. As with any other commodity, supply and demand also plays a major factor in the price of Gold. Here’s how market conditions as well as supply and demand tend to affect the price of gold…
Market Conditions – When economic conditions are poor, we tend to see market conditions follow the economy. In these cases, investors become more afraid of loss and take much of their money out of the stock market. However, because if money isn’t earning for itself, that money becomes a loss. So, in an effort to continuously increase the value of their investment dollars under negative market conditions, investors start to look toward safe haven investments; one of the most common being gold. As a result of the increased demand and dwindling supply caused by the rush of investors looking for safe havens, the value of gold tends to increase under these circumstances.
Supply & Demand – Supply and demand is a major factor when it comes to any commodity. As the laws of supply and demand would tell us, when supply is in excess of demand, the value of gold falls. On the other hand, when demand is stronger than supply, the value of gold increases. These movements aren’t always caused by economic conditions. For instance, there was a recent vote in Switzerland aimed to repatriate much of the country’s gold. If this was to happen, the supply of gold around the world would shrink. As a result, leading up to the vote, the value of gold increased. However, when the news that voters decided against the change, supply issues were no longer an anticipation and the value of gold fell back down.
How Gold Moves
Unlike many other assets that may display quite a bit of volatility in movement, gold moves at a fairly steady pace in whichever direction it’s going. This makes it a perfect asset for binary options traders as trends are not only easy to spot, they tend to last longer in gold than in other assets.