July 22, 2024

Gold: Bullion Trading in the Forex market

LQDFX forex blog: Gold: Bullion Trading in the Forex market

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Bullion is uncoined gold, silver or another precious metal in the form of bars or ingots. Bullion is officially recognized when is at least 99.5% pure. If bullion contains more than one type of metal, then we call it “unparted bullion”. Central banks around the world and many other institutions hold 25% of the total gold supply in the world.

This form of precious metal is traded in various markets. Trading gold online, i.e. in the Forex market, is a relatively recent trend. People used to trade the rare metal for buying goods in ancient years (and it still happens in some places around the world). It has been a medium of exchange and a way to display wealth for thousands of years.

Traders consider bullion and specifically gold a “safe-haven” asset.

Did you know that “bullion” comes from the French word bouillon?

Bouillon meant “boiling”, and people used the term to describe the activity of a melting house.

What influences gold prices in the Forex Market?

Perceptions of the overall economy influence the price of the precious metal. For example, it becomes more popular as an investment during times of economic instability. Value of the US Dollar is also a factor that influences the gold’s price in the Forex Market.

Gold is often used by investors as a hedge against political and financial uncertainty.

Most of the traders around the world monitor gold against the U.S. Dollar, so always take into consideration how the greenback moves. When the dollar is strong, gold tends to be weaker, thus its price falls.

The demand from companies that use gold to make jewelry also affects its price. China, India, and the United States are the three countries with the highest demand.

A quite funny fact linked with gold demand is the “Meghan Markle effect”. Meghan, Duchess of Sussex, who married Britain’s Prince Harry in May 2018, favors yellow gold. Celebrity purchases influence jewelry sales. So, when Markle expressed her preference publicly she helped boosting United States sales in the first quarter of 2018, jewelers said.

Of course, gold is also affected by the production, and as any other commodity the forces of supply VS demand have an impact. It’s also important to remember that commodities generally move by considerably, and, in any case, more than currencies.


Sources: LQDFX, Investopedia, Wikipedia, Merriam-Webster

PLEASE NOTE The information above is not investment advice.