Gold has been a very interesting commodity to watch throughout the course of the year 2016. In the beginning of the year and through the first half, we saw big gains. However, since July, we've seen declines. Now, we're hitting an interesting point as there are strong arguments for both the bullish and the bearish side of the coin. As a result, we're likely to see quite a bit of volatility ahead, leading to strong opportunities for binary options traders. Today, we'll talk about the bearish argument, the bullish argument, and what binary options traders should be watching when trading gold ahead.
The Bearish View On Gold
The bearish view on gold is relatively simple. The idea behind the bearish argument is the fact that gold is considered to be a safe haven investment. Therefore, when economic conditions are positive or improving, demand for gold falls.
The bears argue that while there were real economic concerns early in the year, that's changing. Due to stimulus efforts from central banks around the world, we're starting to see stabilization in the global economy and growth is coming. This ultimately means that growth is likely coming in the stock market. As such, investors will continue to get rid of safe haven investments. At the end of the day, the bears believe that this will cause demand for gold to continue falling, leading to further declines in the precious metal.
The Bullish Argument
On the bullish side, the argument becomes a bit more complex. Here are the main points to the bullish argument on gold…
Economic Conditions – The bulls agree that at the moment, the global economy seems to be improving. However, they don't agree that this trend will continue. In fact, the bears point out some very real concerns. One of the biggest is that thanks to global stimulus efforts, we're seeing bubbles in important markets around the world. For example, the real estate market is becoming concerning. The bears argue that economic conditions are likely to take a turn for the worst soon, leading to increases in safe haven demand.
Brexit – Another major topic at the moment that bulls believe will lead to gains in the price of gold is the Brexit. In the beginning of the Brexit, concerns with regard to the back lash faded quickly. However, recent comments from both the President of France, and the Chancellor of Germany lead investors to believe that negotiations could lead to a hard Brexit. This would have major implications with regard to the global economy.
India – Finally, we're seeing something interesting in India. India generally acts as a floor for the price of silver. When the price drops too low, we see incredible demand out of the country. As a result, the price of gold in India climbs higher than the average price around the world. We're seeing this at the moment. The bears argue increasing demand in India is a sign that we will see a reversal in the price of the precious metal soon.
What Binary Options Should Be Watching Out For
As binary options traders, it's possible to make money from gold no matter which direction it goes. With strong arguments on both sides, we're likely to see quite a bit of movement, leading to opportunities for binary options traders. When trading the precious metal, keep a close eye on news surrounding the Brexit, the global economy, and the demand for gold in India. Each of these stories could lead to big movement and profitable opportunities.
What Do You Think?
Where do you think gold is headed moving forward? Join the discussion in the comments below!
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