November 30, 2022

Trading gold in the Forex market amid COVID-19 pandemic

LQDFX Forex news Blog | Trading gold amid COVID-19 pandemic

Share this article

Gold’s rally has lost steam just below $2,000 an ounce and trading gold amid the pandemic becomes increasingly popular.

The gold price has surged 30% this year to an all-time peak around $1,975 an ounce. The precious metal is considered as one of 2020’s best-performing assets. The rally was driven by investors who see gold as a store of value in times of stress. It is a common belief that gold will hold its value better than other assets as the economic fallout from COVID-19 is gloomy.

Central bank stimulus has pushed inflation-adjusted U.S. bond yields to record lows. This made non-yielding gold more attractive. Also, the fact that the dollar has weakened sharply, made the valuable bullion cheaper for buyers with other currencies.

The never-before-reached $2,000-an-ounce mark is a major psychological resistance level.

Fears over the economic fallout from rising coronavirus cases bolstered its safe-haven appeal.

What influences prices when trading gold?

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.

Investors often use the invaluable commodity 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 jewellery also affects its price. China, India, and the United States are the three countries with the highest demand.

Of course, production affects gold too, and like any other commodity, the forces of supply VS demand have a significant impact over the yellow metal. It is also important to remember that commodities generally move by considerably, and, in any case, more than currencies.