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CFDs come with a high risk of losing money rapidly due to leverage. 71% of accounts lose money when trading CFDs with this provider. You should understand how CFDs work and consider if you can take the risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

79% of retail investor accounts lose money when trading CFDs with this provider.

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Gold Price (XAUUSD): Live Price Chart

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Gold Price Overview

Gold Investment Opportunities

Gold Trading Strategies

Gold Price Overview

Gold Investment Opportunities

Gold Trading Strategies

Gold Price

Gold is the most popular precious metal for investment. Investors typically buy gold to diversify risk, often through futures contracts and derivatives. The gold market, like other markets, experiences speculation and volatility. However, gold has proven to be the most reliable safe haven compared to other precious metals across many countries.

Historically, gold has been used as money and served as a standard for currency equivalents specific to various economic regions or countries until recent times. Many European countries adopted gold standards in the late 19th century, though these were temporarily suspended during the financial crises of World War I. After World War II, the Bretton Woods system pegged the US dollar to gold at a rate of $35 per troy ounce. This system lasted until the 1971 Nixon shock, when the US unilaterally ended the direct convertibility of the US dollar to gold, transitioning to a fiat currency system. The Swiss franc was the last major currency to sever its ties to gold in 2000.

Since 1919, the most common benchmark for the price of gold has been the London gold fixing, a twice-daily telephone meeting of representatives from five bullion-trading firms of the London bullion market. Additionally, gold is traded continuously around the world based on the intra-day spot price, derived from over-the-counter gold-trading markets globally (code "XAU").

The following table shows the gold price versus various assets and key statistics at five-year intervals. This provides a detailed view of gold's performance relative to other investment options over time, underscoring its role as a reliable store of value and a hedge against economic uncertainties. The price of gold is a crucial indicator for investors looking to safeguard their wealth and navigate the complexities of the financial landscape.

Influencing Factors

Supply and Demand Dynamics

Like most commodities, the price of gold is driven by supply and demand, including speculative demand. However, unlike most other commodities, the factors of saving and disposal play a larger role in affecting its price than its consumption. Most of the gold ever mined still exists in accessible forms, such as bullion and mass-produced jewelry, which often hold little value over their fine weight. This means gold remains nearly as liquid as bullion and can easily re-enter the gold market. At the end of 2006, it was estimated that all the gold ever mined totaled 158,000 tonnes.

Given the substantial quantity of gold stored above ground compared to the annual production, the price of gold is primarily influenced by changes in sentiment, impacting market supply and demand equally, rather than changes in annual production. According to the World Gold Council, annual mine production of gold in recent years has been close to 2,500 tonnes. About 2,000 tonnes go into jewelry, industrial, and dental production, while around 500 tonnes go to retail investors and exchange-traded gold funds.

Central Banks' Role

Central banks and the International Monetary Fund play a significant role in influencing the price of gold. At the end of 2004, central banks and official organizations held 19% of all above-ground gold as official gold reserves. The ten-year Washington Agreement on Gold (WAG), starting in September 1999, limited gold sales by its members (Europe, United States, Japan, Australia, the Bank for International Settlements, and the International Monetary Fund) to less than 400 tonnes a year. In 2009, this agreement was extended for five years, with a limit of 500 tonnes per year. European central banks, such as the Bank of England and the Swiss National Bank, have been key sellers of gold during this period. In 2014, the agreement was extended for another five years at 400 tonnes per year. In 2019, the agreement was not extended again.

Although central banks do not generally announce gold purchases in advance, some, like Russia, have expressed interest in increasing their gold reserves since late 2005. In early 2006, China, which only holds 1.3% of its reserves in gold, announced it was seeking ways to improve returns on its official reserves. Some bulls hope that this indicates China might reposition more of its holdings into gold, aligning with other central banks. Chinese investors began pursuing gold investment as an alternative to the Euro during the Eurozone crisis in 2011, and China has since become the world's top gold consumer as of 2013.

Macroeconomic Variables

The price of gold can be influenced by various macroeconomic variables. These include the price of oil, the use of quantitative easing, currency exchange rate movements, and returns on equity markets.

Hedge Against Financial Stress

Gold, like all precious metals, may be used as a hedge against inflation, deflation, or currency devaluation, though its effectiveness as such has been questioned. Historically, gold has not consistently proven to be a reliable hedging instrument. A unique feature of gold is that it has no default risk, making it a distinct asset in times of financial stress.

Gold Bars

Investing in gold bars is a traditional method of acquiring gold, with countries like Canada, Austria, Liechtenstein, and Switzerland making it easy to buy and sell through major banks. Gold bars come in various sizes, such as the 400 troy ounces standard in Europe and 1-kilogram bars. While gold bars often have lower price premiums compared to coins, they carry a higher risk of forgery. The London bullion market ensures a verifiable chain of custody for Good Delivery bars, facilitating their secure trading.

Gold Coins

Gold coins are a popular way to own gold, priced based on their fine weight plus a small premium. Bullion coins come in sizes ranging from 0.1 to 2 troy ounces, with the 1-ounce size being the most common. The Krugerrand is the most widely held bullion coin, with other popular options including the Australian Gold Nugget, Austrian Philharmoniker, and American Gold Eagle.

Gold Rounds

Gold rounds resemble coins but do not have currency value. They come in similar sizes to coins and often have lower overhead costs due to the absence of added metals for durability. This makes them a cost-effective option for those looking to invest in gold.

Gold Exchange-Traded Products

Gold exchange-traded products (ETPs), such as ETFs and ETNs, offer exposure to gold prices without the need to store physical bars. The first gold ETF, Gold Bullion Securities, launched in 2003, and SPDR Gold Shares is a notable example. While ETPs simplify gold investment, they carry risks beyond the inherent value of the precious metal itself.

Gold Certificates

Gold certificates provide a way for investors to avoid the risks and costs associated with storing physical bullion. Banks issue certificates for allocated or unallocated gold, with allocated certificates linked to specific numbered bars. However, these certificates come with their own set of risks that investors need to consider.

Gold Accounts

Gold accounts, offered by various banks, allow investors to buy or sell gold similarly to foreign currency. These accounts can be allocated (fully reserved) or unallocated (pooled), with significant differences in the account holder's claim on the gold. Allocated accounts provide specific ownership of physical gold, while unallocated accounts represent a claim on a pool of gold.

Derivatives, CFDs, and Spread Betting

Gold derivatives, including futures and options, are traded on various exchanges globally. In the US, gold futures are primarily traded on the New York Commodities Exchange. While derivatives offer leverage, they also increase the risk of capital loss, making them a higher-risk investment option.

Gold Mining Companies

Investing in gold mining companies provides exposure to gold prices through company shares. These shares can be volatile due to factors like operational issues, mismanagement, and market conditions. Some companies hedge gold prices to reduce volatility, but this can also impact the potential returns for investors.

Fundamental Analysis

Fundamental analysis in the gold market involves a comprehensive evaluation of the macroeconomic environment. Key factors include GDP growth, inflation rates, interest rates, and energy prices. Additionally, analyzing the global supply and demand dynamics for gold is crucial to understanding its market behavior and potential future trends.

Gold Versus Stocks

Gold is often compared to stocks as a form of investment. Stocks are typically seen as vehicles for growth, offering the potential for significant returns over time. In contrast, gold is viewed as a store of value, providing stability and a hedge against economic uncertainty. Historically, stocks have generally outperformed gold, benefiting from stable political climates and strong property rights that promote business growth and profitability.

Using Leverage

Investors may use leverage to enhance their positions in gold, borrowing against existing assets to trade gold derivatives or unhedged mining shares. While leverage can amplify potential gains, it also significantly increases the risk of loss. This approach requires careful consideration and risk management to avoid substantial financial setbacks.

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* The spreads provided are a reflection of the time-weighted average. Though Skilling attempts to provide competitive spreads during all trading hours, clients should note that these may vary and are susceptible to underlying market conditions. The above is provided for indicative purposes only. Clients are advised to check important news announcements on our Economic Calendar, which may result in the widening of spreads, amongst other instances.

The above spreads are applicable under normal trading conditions. Skilling has the right to amend the above spreads according to market conditions as per the 'Terms and Conditions'.

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FAQs

What are the differences between gold and silver?

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Gold and silver are two of the world's most traded metals, but understanding their differences is a complex and ever-evolving task. Gold is often seen as a safe investment, since its value usually remains high even when other markets fluctuate. Conversely, silver can be more volatile due to its many industrial uses, so trading in it with CFDs carries more risk than investing in gold.

Nevertheless, some precious metal traders still find advantages to trading in silver over gold: the demand for industrial silver can lead to prices fluctuating which presents opportunities for savvy investors. Ultimately, differences between gold and silver depend largely on their respective market conditions; whilst one might gain at once time, the other could gain significantly at another.

How much gold is there available?

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When it comes to gold resources, the amount available in the world today can vary widely. Estimates range from 165,000 tons to over 2 million tons, accounting for gold that is both accessible and inaccessible. What is certain is that gold continues to be a valuable asset and its worth fluctuates with market forces. Mining and gold prospecting remain very lucrative endeavors as a result of gold's inherent value.

In fact, gold has been used since ancient times as currency and still holds some significance in modern economies with countries like China leading the charge. Though gold may not be mined and traded as much as other commodities like oil or wheat, what gold there is available remains significant both economically and culturally worldwide.

How to trade gold?

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Those wanting to trade gold have a few options; you could buy physical gold such as coins and bars, use futures and options, or opt for trading Contracts For Differences (CFDs). CFDs are essentially an agreement between two parties which stipulate how much money will be exchanged depending on how the price of an asset (in this case gold) changes.

By using CFDs when trading gold, you’ll benefit from the ability to leverage your position – meaning that you can open a larger position than with just your capital alone - but it’s worth noting that the higher risk associated requires careful consideration. That said, trading gold can be a great way to gain exposure to both upside potential and downside risk of owning physical gold at a fraction of the cost.

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Make the most of price fluctuations - no matter what direction the price swings and without the restrictions that come with owning the underlying asset.

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