Factors affecting the gold rate
Over the past 20 years, the gold exchange rate on the exchange has shown an increase of more than 320 percent, that is, at least 10% per year. As for diversifying risks, gold seems to be a very attractive instrument with a yield higher than foreign currency deposits and with minimal risk, but not everything is so rosy with this instrument.
Gold is called “Safe Harbor”, an instrument where investment capital flows in times of global turmoil. The metal will always be in demand in the industry, it cannot be depreciated by emission, since there are costs for its extraction and its limited quantity. Historically, it is gold that is the worldwide equivalent. Despite its reliability, investors are in no hurry to invest in it. Few numbers:
- From the last 20-year period, explosive growth took place in 2008-2011, when gold more than doubled in price amid the global crisis. Even the 2000 dot-com crisis did not have such an impact.
- Since 2011, gold has lost 34% in just 2 years.
- From 2013 to 2019, the gold rate on the exchange showed an increase of about 8-10%, entering a stable long-term flat.
What affects the gold rate on the exchange
The main factors influencing the gold rate on the exchange are:
- Geopolitical situation. Gold profitability is relatively low, therefore investors prefer other assets in quiet times: stock indices, currency, cryptocurrency. In the event of a global (not local!) Crisis, money flows into gold.
- Demand Offer. Adjusted by mining companies and industry demand. The price may be slightly affected by the discovery of new deposits.
- The policy of forming gold and foreign exchange reserves. The decision to reduce / increase / exclude gold from gold and foreign exchange reserves, thereby throwing it into the market in large volumes or buying it, adjusts the price.
- Dollar exchange rate. If it falls, gold rises. An inverse correlation is common.
Evaluation of all these factors can help predict the price of gold on the stock exchange in the short term. Futures on Au and correlated metals (silver, palladium) can be interesting for speculative earnings in the time frame from several days to several months. Long-term investments can be interesting only if investments are made for a period of at least 10 years with the hope of the Elliott wave theory, according to which crises tend to recur. There are several ways to invest:
- Buying futures on international exchanges.
- Purchase of securities of ETF-funds.
- Purchase of physical gold bars or certificates with gold storage conditions in a vault.
- Investing in a “gold” deposit.
- Earning money on CFDs in Forex.
- Buying gold bullion coins.
Add your options for investing in gold in the comments!