Gold (XAU/USD) - A Report Brought to You by Q8 Trade
Gold is one of the most important metals on earth. It is a precious metal because of its precious value and importance in our daily life.
In addition, it is one of the most important metals that play a pivotal role in the rate of the global economy and therefore has an important impact on monetary policies in many countries while it was used in ancient financial transactions instead of major currencies.
A brief history of the importance of gold
China ranks as the world’s largest producer of precious metal, producing about 450 tonnes annually.
Gold is introduced into many industries and products such as jewelry thanks to its characteristic properties such as drag capacity, roads, electricity conduction, and corrosion resistance. It is also used in many applied industries especially in electronic fields.
The yellow metal was found in nature so people came to acquire it for its distinctive properties such as softness, ease of treatment and non-corrosion, and its scarcity, weight, and ability to form alloys. All of these factors raised the value of yellow metal over time.
It is located in its free form and also comes in the form of pieces of rocks in the rivers usually coming from the ground or in the silt or metal veins that rarely exist within the precious metal because they are trapped between layers of quartz.
The use of this metal or decorative purposes dates back to ancient times. In the 1980s, golden artifacts were found in the region of the Levant, dating back to the Bronze Age. Some 3,000 golden artifacts were found in the form of funerary attachments dating back to that era around the fourth millennium in a graveyard near Varna Necropolis in Bulgaria and this is the oldest golden assets in the European continent and found about 7000 golden artifacts in the area surrounding the Black Sea dating back to the period of Maykop civilization in the copper age as well.
Other ancient golden artifacts found in Central Europe and date back to the Bronze Age (around the 2nd millennium BC).
According to the data, about 75% of the supply of the precious yellow metal currently being traded has been extracted since 1910. According to the World Gold Council, the total amount extracted in the world is about 190 thousand tons and can be represented with a cube with a length of a side up to about 21 meters.
On the other hand, if the price of the trophy is about US$1.5, the total amount extracted is equivalent to about US$9 trillion.
How is the value of the yellow metal determined?
The global prices of the precious metal are determined as any other commodity in our daily lives, according to the rate of supply and demand, where the price of the metal is determined by trading in the market and the price is determined by a process called “gold price stabilization” first applied in 1919. This theory provides the markets with fixed prices until the process is reconciled with US markets while the price was fixed in 1968.
In 2005, the World Gold Council estimated the global supply at 3.859 tons while global demand was estimated at 3.754 tons with a surplus of about 105 tons.
And the price of the precious metal rose during 1980 remarkably where the price of an ounce then about $850 but it has fallen sharply with the end of that year for up to $252, and since 2001 the price of gold started rising at a fast pace to exceed about $850 an ounce when it reached its highest level in 2008 at $1023.50.
By the end of 2009, the precious metal rose to $1217.23 an ounce and it rose again in 2010 coinciding with the European debt crisis that prompted investors to buy physical ounces of the precious metal as one of the most important safe havens.
Gold continues to rise in 2011 coinciding with the Arab Spring crisis that hit the Middle East and North Africa region hitting a new record high of $1432.75 per ounce in March of that year. The price of the yellow metal soared significantly during that year to reach $1913.50 per ounce during August of the same year, the highest record value reached.
But it began to decline between 2012 and 2018 to settle at a level of between $1200 to $1300 an ounce.
What is makes gold interesting to trade?
Apart from the fact that this metal is very attractive and was used in financial transactions, it has no intrinsic value other than that shown by humans. It is used in some other fields such as electronics and electronic chips.
The yellow metal is still used in the manufacture of coins and the minting in Perth, Western Australia is one of the most important manufacturers of this type of currency.
These coins are not traded among people but are kept by those wishing to collect and acquire this type of currency.
In addition, about a quarter of the amount of gold extracted from the earth in history has been formed in the form of solid alloys designed to form a real wealth and remain in the vaults of banks where the United States holds in the coffers of banks most of the yellow bars in the world.
About 80% of the supply currently extracted is used in the jewelry industry. Although the United States holds the largest amount of gold bullion in its banks, most of it in the world jewelry today is in India.
Gold retains its luster because it is unaffected by water and air which is key to the corrosion of other metals such as iron. Gold foil is characterized by unusual properties including metal reaction with light. When it is converted into thin sheets, the metal becomes transparent.
In addition, it is resistant to bacteria so doctors use it to repair or replace damaged teeth. In the past few years, it has emerged as an ideal metal used to make parts implanted in the human body such as small wire tubes used to strengthen veins or arteries.
Is trading in the precious metal profitable?
Investment in the yellow metal is one of the most important trades in the world. The trade is available in many banks and platforms that can be dealt with in the import, sale and purchase of it through money markets, investment funds, mutual funds, and future. Gold can be stored and saved by forming gold bullion for investment purposes or expensive jewelry sold at the time of need.
Many investors and individuals around the world purchase it to invest in it by storing it in the form of gold bullion of different weight ranging from five grams and ending at a kilogram and it can be stored in the form of jewelry and gold jewelry for decoration but anyone who accepts investment in gold to pay attention to the operations of the monument and piracy that could be exposed to, which leads to the loss of a lot of money.
Despite the economic crises that have affected the world in recent times, which affected many commodities, the yellow metal is the only one that has not been affected and of course, it was not affected by those who put their wealth in investing in it. And because it is demand at all times and places, it is always a winning trade that drives investors especially to those who have been hit hard by the changes in the world of investment and trade. To accept to trade all their wealth or part of it to invest in the precious metal because it is a guaranteed trade, as a safe haven for many people around the world.
However, before deciding which currency pair you would like to trade, we highly encourage you to learn more about what would you get from the platform that you choose to trade with and what are the advantages you will be getting from choosing a certain platform over another.
What factors affect the performance and price of gold in the markets?
The price of the US dollar is one of the most important factors affecting the price of the precious metal, as in the case of the rise in the price of the dollar significantly fall immediately gold prices and vice versa, and this is because many people in the market are afraid of weak dollar resort to invest in gold bullion, as demand for the metal rises because people tend in the event of a devaluation of the dollar to hoard gold. And like any other commodity, gold is affected by the price of supply and demand.
World gold prices are also affected by the policies of China and India as the world’s largest buyers of precious metal. For example, a decision was made in 2004 to give Chinese citizens the ownership of gold for the first time in history, which has played a role in influencing global gold prices worldwide. 2009 witnessed a 32% decline in the demand for gold and jewelry due to the global economic crisis which led to a decline in world prices but only slightly.
In addition, the monetary policies of central banks in inflation situations mainly affect global gold prices. Interest rates in banks remain low because people move away from investing in banknotes and turn to invest in gold in the hope of better returns. When banks give interest rates, gold prices are falling significantly.
The deterioration of the political situation, the sharp increase in oil prices after the Iraq war and the September 11 attacks have also been factors for its price movement. The decline in gold production in the last five years while the continuous increase in the world’s population increases the demand for investment in gold bullion. There’s also the natural desire of some people to acquire the metal.
What are the advantages of gold trading via CFDs?
CFD or contracts for difference is a contract between two main parties in any transaction, namely the seller and the buyer.
The value of the contract shall be based on the value of the underlying asset at the end of the contract or at the end of the transaction at the discretion of both parties. If the value of the underlying asset exceeds the price at which the transaction was initiated, the seller shall pay the difference between the current price of the asset and the agreed price. The buyer pays the difference between the base price of the asset and its current price.
CFDs are a powerful tool of financial trading where profit is possible through the movement of the value of the underlying asset. Purchases can be opened through a change in the value of the asset depending on many factors. The movement of contracts changes depending on the change in the value of the underlying asset and the change of the causative factors at the same time.
CFD is, however, the best instrument of financial trading and has many tools that distinguish it from others.
The contracts for the CFD, like any other contract, carry profit and loss when buying or selling assets but offers abundant opportunities for trading on the real assets as profit without owning them is actual ownership of the tool you want to work on the contract.
Example: If you want to buy 1,000 gold shares in a well-known global company such as Freeport-McMoRan, the world’s largest gold and copper trading company, you pay 50% of the total value of these shares. The remaining part of the shares will be paid out. All these costs can be eliminated by buying CFD 1000 shares from the same company and you will not pay such money. All you will pay is to deposit a margin of up to 2.5% of the total value of the shares of the company.
How do you trade in gold via CFD with Q8 Trade?
You can trade gold through CFDs by following these steps:
- Select the financial instrument.
- Select the transaction type.
- Enter the volume.
- Manage the risks.
- Watch your deal.
- Close your deal.
Why should you trade in gold with Q8 Trade?
- Q8 Trade offers the possibility of trading gold through CFDs which ensures you can make profits even at a time when precious metal prices are falling.
- You can use the leverage offered by the trading platform to increase the value of the amount you trade and multiply it.
- There is no exchange charge when you trade gold through CFDs with Q8 Trade since you do not actually own gold.
- Q8 Trade has many tools that you will need during gold trading: live charts, real time prices, historical prices, gold news and performance impact, technical and technical analysis, recommendations and more.