Gold is a very interesting commodity to watch, and for very good reason. Like most other commodities, the value of gold is based on supply and demand. However, the fact that the precious metal is a safe haven investment adds a bit of complexity to value movements. Today, we'll talk about what causes price movement in gold, what we've seen from the precious metal recently, what we're likely to see moving forward, and how binary options traders can take advantage of the trends. So, let's get right to it…
What Causes Price Movement In Gold
As mentioned above, gold is like all other commodities in the sense that the value of the precious metal is very dependent on supply and demand. When supplies are low and demand is high, the value of gold climbs. Adversely, when supplies are high and demand is low, the value of the commodity declines. However another factor mentioned above is the fact that gold is known as a safe haven investment. This adds a bit of complexity to gauging price movements in the precious metal because investors can greatly increase or decrease demand at any time. Essentially, when market conditions are poor, investors look to gold as a way to keep their investing dollars safe. Adversely, when market conditions are positive, investors pull money out of gold to put it back into the market, leading to declines in demand.
What We've Seen From Gold Recently
Recently, we've been watching as gold has shown a dramatic spike in value. The reasons for this spike in value is relatively simple to understand. Here's why gold has been jumping…
Supply – Lately, we've seen big changes in the supply of gold. In fact, on January 17th, it was announced that gold has reached peak supply. This means that we're not likely to see increases in the production of the precious metal any time soon. In fact, it has been predicted that this year alone, we're going to see a decline in the production of gold in the amount of about 3%. That's huge when it comes to supporting price growth.
Demand – Demand for gold is climbing as well. The rise in demand has quite a bit to do with the safe haven properties of the precious metal. The reality is that market conditions are very poor, and investors are fearing a global economic and market meltdown. As a result, we're seeing more and more investors looking to the precious metal as a way to keep their money safe.
What We're Likely To See Moving Forward
Moving forward, I have an incredibly bullish opinion of what we can expect to see from the value of gold. The reality is that the supply decline isn't likely to change any time soon. That in combination with the fact that demand is growing as a result of poor market movement will likely send the value of the precious metal skyrocketing moving forward. The bottom line is that neither of these factors are likely to change in the short term, so further increases in value are in store.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it's our job to predict whether the value of financial assets will rise or fall. When it comes to gold, this job is relatively simple. Based on the factors mentioned above, the value of the metal is likely to increase. As a result, traders should watch for strong call option opportunities in order to ride the trends up to the profits.
What Do You Think?
Where do you think the value of gold is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Flickr]