Educational Content

Pipscollector.com - Crude oil is a major global energy source and a widely-traded commodity. In this piece, we look at the origins and history of crude, the key factors that affect its price and the main reasons to trade this asset.

MAIN TALKING POINTS:

• What is crude oil and what is it used for?
• Main players in the crude oil market
• Factors that affect oil prices

WHAT IS CRUDE OIL AND WHAT IS IT USED FOR?

Crude oil, or petroleum, is a naturally-occurring fossil fuel and currently the world’s primary energy source. It is made from ancient organic matter and can be distilled into component fuels such as gasoline, diesel, and lubricants, each of which have a multitude of industrial applications.

The commodity is usually extracted from underground reservoirs through drilling, and the countries that produce the greatest volume of crude oil, as of 2019, are the USA, Russia, and Saudi Arabia.

To understand how crude oil relates to other energy resources and assets, as well as how to trade them, visit our Major Commodities page.

BRENT AND WTI CRUDE OIL EXPLAINED

The composition of crude oil varies by source, but two types are used to benchmark global prices. They are the United States’ West Texas Intermediate (WTI) and United Kingdom’s Brent crude. The differences between them are based on factors such as composition, extraction location and prices, but for more details, as well as how to trade each asset, see our WTI vs Brent comparison.

POWER PLAYERS IN THE CRUDE OIL MARKET

The Organization for Petroleum Exporting Countries (OPEC) was established in 1960. This body sets production quotas for its members, with the aim of reducing competition and keeping prices at profitable levels. OPEC is dominated by Kuwait, Qatar, Saudi Arabia (which controls the Strait of Hormuz), and the United Arab Emirates. While OPEC generally controls a large percentage of the oil supply, the US, as of 2019, is the world’s largest producer of oil.

Institutions that supply oil to the global market are made up of international oil companies, or IOCs, such as ExxonMobil, BP and Royal Dutch Shell. These are investor-owned and look to increase shareholder value through private interests. However, national oil companies, or NOCs, such as Saudi Aramco and Gazprom, are fully or majority-owned by a national government.

For more about the power players and their role in global oil production, see our 8 Surprising Crude Oil facts.

HISTORY OF CRUDE OIL

The history of crude oil has seen many changes since the beginning of the century, when global supply was largely controlled by OPEC, but demand was driven by the US. With OPEC calling the shots and Asian demand rising rapidly, prices went from a cost per barrel of $25 for Brent and $27 for WTI in March 2001, to $140 for both types by June 2008, representing a price bubble.

However, the last decade has seen technological advancements and deregulation facilitate increased US shale oil production, leading to shift in power from OPEC to the US. Prices fell from $112 for Brent and $105 for WTI in June 2014, to under $36 for both by January 2016. OPEC responded by colluding with several countries – including Russia – to implement ‘production quotas’ designed to stabilize prices. These brought the cost per barrel back above $70 for Brent, and $65 for WTI, by April 2018.

The below chart shows some key landmarks in the price of US Crude this century and the reasons for the swings.

WTI CRUDE OIL (2000-2019)

WHAT AFFECTS CRUDE OIL PRICES?

Crude oil prices are affected mostly by supply and demand, which in turn are influenced by factors such as outages, OPEC production cuts, seasonality, and changing consumption patterns. For more on these and why they are essential fundamental factors to understand when trading the asset, see our guide to trading crude oil.

USD AND THE PRICE OF OIL

The US Dollar and oil have historically had an inverse relationship. When USD is weak, the price of oil has traditionally been higher in dollar terms. Since the US was for long periods a net importer of oil, rising oil price has meant the US trade balance deficit has risen since more dollars are required to be sent abroad. However, some believe this relationship follows less reliable patterns in modern times.

There is a more predictable link between the Canadian Dollar and oil prices. For example, as of 2019, Canada exports some three million barrels of oil and petroleum products per day to the US, meaning a huge demand for Canadian dollars is created. If US demand rises, more oil is needed, which often means oil prices rise, and could accordingly mean a fall in USD/CAD. Conversely, if US demand falls, oil prices may fall too, meaning demand for CAD drops in turn.

Reasons to Trade Crude Oil

Oil is a dynamic, volatile and liquid market – and stands as the most traded commodity in the world. Here’s more on the benefits of engaging with this asset.

1. The volatile nature of trading this asset makes it a favorite of swing and day traders, who react to the latest oil pricing news. While the trading can be risky, some see the oil market as an opportunity in its purest form.
2. Crude oil is a liquid market, traded in huge volume. This means trades can be opened and closed at the price points you want and at lower trading cost.
3. Oil can be traded as part of a hedging strategy to mitigate against the effects of the asset’s volatility.
4. Trading oil can be part of a diversified portfolio of commodities, stocks and bonds.
   HOW TO GET STARTED TRADING CRUDE OIL

We offer an in-depth guide to

Trading crude oil and publish daily news and analysis articles reviewing the latest crude oil prices, among other assets. You can also download our free quarterly oil forecasts which will equip you with the knowledge to make informed decisions in the oil market.

Read more articles in the Educational Content category to update the latest forex knowledge from Pipscollector.

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Pipscollector.com - The gold - silver ratio offers invaluable insight into the possible movements of the two precious metals relative to each other. Traders look to the ratio for an edge in identifying buy and sell signals in the market. Therefore, knowing how to trade the gold-silver ratio can be a huge advantage to maximize your commodities trading strategy.

WHAT IS THE GOLD-SILVER RATIO?

The gold-silver ratio is simple. It is the number of silver ounces you would need to trade to receive one ounce of gold at current market prices. For example, when gold price is trading at $1000 per ounce and silver price is trading at $16.67 per ounce the gold-silver ratio will be equivalent to 60.

• The gold to silver ratio has averaged around 60 from 2001 to 2017. With highs breaching 80 (ounces of silver to one ounce of gold) and lows sinking to around 40.
• The ratio tends to increase during times of economic distress. The cause of this relationship is due to gold generally outperforming silver during recessions, leading to increases in the ratio.
• The ratio peaked at 100 in 1991 when silver prices dropped to extreme lows.

HOW THE GOLD-SILVER RATIO WORKS

• When the gold price increases faster than the silver price the ratio will increase .
• When the silver price increases faster than the gold price the ratio will decrease .
• When the gold price decreases faster than the silver price the ratio will decrease.
• When the silver price decreases faster than the gold price the ratio will increase.

Source: Bloomberg data

The graph above shows the gold to silver ratio for the past several decades. In 1991 silver was trading at extremely low prices- causing a peak in the gold-silver ratio, denoted by the blue circle in the graph above.

It is also worth noting the spike in the ratio during the 2008 subprime-mortgage crisis, caused by surging gold prices and silver not performing as well. This is denoted by the red circle in the graph above.

HOW TO TRADE THE GOLD-SILVER RATIO

There are many ways to use the ratio to your advantage. Keep reading for the top two strategies on trading the gold-silver ratio.

1) USING THE GOLD-SILVER RATIO TO DETERMINE THE METAL WITH THE STRONGEST TREND AND TRADE IT:

Traders can use the gold-silver ratio to determine which metal may outperform the other and then place a trade accordingly.

A trader could use these five steps to enter a trade on either gold or silver using the ratio:

1) Determine the trend on a gold-silver ratio chart by adding trend lines to the chart. You can use DailyFX’s chart to view the gold-silver ratio by entering “XAUUSD/XAGUSD” in the search bar.

2) Using the time-frame of your choice, determine the trend on gold and silver individually.

3) Use this table to help you determine a bias:

GOLD-SILVER RATIO TREND	GOLD AND SILVER TREND	SIGNAL
Gold-Silver RatioUptrend	Gold and silver inUptrend	Buy Gold
Gold-Silver RatioUptrend	Gold and Silver inDowntrend	Sell Silver
Gold-Silver RatioDowntrend	Gold and Silver inUptrend	Buy Silver
Gold-Silver RatioDowntrend	Gold and Silver inDowntrend	Sell Gold

4) Identify trading opportunities using price action or technical indicators time entries in the direction of the trend.

5) Identify a trade size appropriate for the account size and set stop-losses and take-profits and execute the trade.

Here’s an example using the five steps:

1) Let’s say we open our gold to silver ratio chart on 8 February 2016.We draw our trend lines and the trend lines indicate that the ratio is in a current uptrend as shown in the chart below showing a four-hourly timeframe.

2) Our next step is to determine the individual trend for gold and silver. So, we open the charts and draw our trend lines and notice that both gold and silver are trending upwards as shown in the charts below.

3) The table above indicates that when the gold-silver ratio is trending upwards and gold and silver are both in an uptrend we should buy gold because it has been outperforming silver.

GOLD-SILVER RATIO UPTREND

GOLD AND SILVER IN UPTREND

BUY GOLD

4) Since the beginning of February, gold has increased drastically in price. We should wait for a modest pull-back before attempting to enter the market. Once we do enter the market, we can place our stop-loss below the trend line and our take-profit above the previous high to ensure a positive risk-reward ratio on the trade.

5) We determine an appropriate trade size for our account, execute the trade and set our stop-loss and take profit.

2) TRADING THE HIGHS AND LOWS OF THE GOLD-SILVER RATIO:

There may be times when the ratio reaches historic extremes. When it is near these points, a reversal of the ratio is at risk. For example, when the gold-silver ratio reaches for historical highs (from 80 to 100) the idea is that the price of gold is expensive relative to the price of silver. When the gold-silver ratio reaches for historical lows (from 60 to 40) gold is seen as cheaper relative to silver.

Because the metals are correlated though driven by different factors, they tend to be limited in their willingness to run beyond a gold-silver ratio north of 80-100 or below 60-40, and those tend to be at turning points because the ratio has picked up on a likely abrupt turning points in markets.

The chart below shows times when the ratio was at all-time highs- red circles and all-time lows-blue circles.

Traders can use the table below as a guide to trade the metals when the gold-silver ratio at risk for a reversal:

GOLD-SILVER RATIO EXTREME	GOLD AND SILVER TREND	TRADE SIGNAL
Gold-Silver RatioHistorical High	Gold and Silver inUptrend	Long Silver
Gold-Silver RatioHistorical High	Gold and Silver inDowntrend	Short Gold
Gold-Silver RatioHistorical Low	Gold and Silver inDowntrend	Short Silver
Gold-Silver RatioHistorical Low	Gold and Silver inUptrend	Long Gold

It is very seldom that the gold-silver ratio reaches for these historic highs and lows, but when it does, it could offer good opportunities. Still, it is important to manage your risk because the ratio has been known to breach these historical levels.

GOLD TO SILVER RATIO TRADING: TOP TIPS

 

 

 

GOLD TRADING TIPS

Pipscollector.com - Few markets on Earth have the historical appeal and attraction as Gold. While traders have numerous trading options today, in a number of different currencies or asset classes or geographies, Gold has been a long-standing store of value that’s piqued speculators’ interest for about as long as human beings have traded with each other.

We previously looked at some of the basics around Gold trading in the What is Gold article a little earlier in this sub-module. In this article, we’re going to get a bit more granular as we investigate Gold Trading Strategies, Tips and Tactics.

Probably one of the more obvious aspects of Gold, particularly on a longer-term basis, is the cycle sensitivity that will often show around the metal – and this isn’t a new phenomenon. As markets themselves are cyclical animals, Gold often moves to a similar type of tune, although timing may be differentiated from other markets at the time. Looking at Gold prices over the past 45 years, and this becomes a bit more clear. On the below chart, trends and ranges have been identified by blue or grey boxes, and that leads us into tip number one:

GOLD TRADING TIP #1: ADAPT TO THE PRESENT CONDITION

The key takeaway here is the importance of adaptation: Because if a trend trader approaches Gold with their typical approach while Gold markets are in a range, there’s high odds they could see unfavorable results. If Gold markets are mean-reverting and range-bound, the trader would likely want to approach the matter with a range-based approach. But, when Gold markets are trending, such as the case from 2001-2011 or 1976-1980, then traders are going to want to utilize trend strategies to adapt to the present condition.

Gold Futures Monthly Chart

Source: Tradingview

GOLD TRADING TIP #2: WATCH THE US DOLLAR

The US Dollar is traded in a number of markets but, in the largest venues, Gold is traded in US Dollars. As a matter of fact, one common equation on CFD platforms presents a quote for Gold prices as ‘XAU/USD.’ The chemical symbol for Gold on the periodic table of elements is ‘AU’ and the denominator in that quote is the US Dollar, highlighting how Gold is being priced in terms of US Dollars.

This also means that, all factors held equal, and if Gold made no move at all but the US Dollar increased in value – the price of Gold could go down. Because in the function above, the value of the denominator, or USD, would increase in value thereby decreasing the value of the function as a whole.

So, there could be a tendency for Gold to display an inverse correlation with the US Dollar. This isn’t all of the time, there are scenarios where both Gold and the Dollar may increase in value although those are somewhat rare, historically speaking.

On the below chart, that correlation is highlighted in the bottom portion of the image. Reads or values above the zero line indicate positive correlation which, again, is somewhat rare but not unheard of. Reads below zero highlight inverse correlation, with a value of -1 highlighting a perfect inverse relationship.

Gold Monthly Price Chart: An Inverse Relationship with the US Dollar

Chart prepared by James Stanley; Gold on Tradingview

GOLD TRADING TIP #3: KNOW YOUR TIME FRAMES

On the above charts we’re looking at the bigger picture behind Gold prices using the Monthly variety. But these conditions and market changes can take place on shorter-terms, as well, and it’s key for traders to have some type of consistent framework for their analysis so that they can properly implement their strategies in the ways that they want.

As we looked at in the multiple time frames article, traders should analyze markets from more than a single vantage point. The above monthly variety can be helpful to see the bigger picture – but for actually setting up trades and implementing strategies, traders will likely want to look to shorter time frames.

In the above graphic, the blue box on the right side of the chart shows a trend that’s been going for a little over two years now. But, looking at the shorter-term daily chart below to get a more granular look at that two-year-outlay shows that Gold prices were not trending the entire time. As a matter of fact, the same type of trend-range-trend-range relationship presented itself inside of this longer-term trend.

This is again important for traders when setting up strategy because for those that are looking to trade a trend, waiting for the monthly chart to highlight that potential may be too late. On the below chart, that blue box has been expanded so we can take a more granular look at the trend; but this time, I’ve added green boxes around the shorter-term trends and grey boxes around the mean-reverting or range-bound periods.

Gold Daily Price Chart

GOLD TRADING STRATEGIES

Perhaps more important than the specific strategy that one is using to analyze or set up trades in Gold is the ‘fit’ to that specific market condition. For instance, if we look at the above image and focus on the green boxes, when the short-term trend is moving in the direction of the longer-term trend, traders are going to want to follow the age-old adage of ‘buying low and selling high.’ In the grey portions, however, when prices are ranging, traders want to similarly buy low and sell high but they’re going to want to do that in a slightly different way; closing the entirety of the long position while ‘high’ and then looking at potentially getting short to play the other side of the range.

Right up front – this means that no trader is always going to be ‘right’ because conditions, similar to trends, will change; and its impossible to know that until after the fact. This is where items like trade and risk management come into play, potentially helping to mitigate the downside in those instances where something changes or shifts away from their expectations.

Simplifying Market Behaviors by Assigning ‘Conditions’

With any market, if you think about it, there’s really only a couple of things that prices might do: Trend or not. Either prices are trending in a directional move for some reason, or they’re not trending at all: And the transitory state between mean-reversion and trends are breakouts, which are technically a market condition, itself. So, in that effort of simplification, analysts can break down market conditions into three specific types:

1. Trend – a directional move is showing and there’s often a fundamental reason for it as traders are bidding higher-highs and higher-lows (or selling lower-lows and lower-highs).
2. Range/Mean-Reversion – devoid of a driver, prices will often display no trend, which can open the door for range-bound or mean-reversion strategies.
3. Breakouts – this is what happens when new information gets priced-in, and this can create a breakout move from a range and into a new trend. That new trend may last for a while or it may merely propel price action into a new range.

Bespoke Approach for the Proper Condition

Knowing what state a market is in isn’t enough, as traders are usually going to want to cater their approach to that specific condition. For instance, a trader focusing on breakouts likely won’t be able to withstand as much excursion as a trader picking on range/mean reversion setups.

We help traders learn more about strategies for each of these conditions. But, perhaps the most important aspect of customizing a strategy to a specific traders’ needs is the risk management component.

Read more articles in the Educational Content category to update the latest forex knowledge from Pipscollector.

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Pipscollector.com - For thousands of years, Gold has been praised for both its physical and economic appeal, becoming one of the most popular safe-haven assets.

This article will discuss Gold as an investment and as a tradeable commodity and will look to explore the main drivers of price action.

GOLD AS AN INVESTMENT

In ancient history, gold was desired by many for its unique beauty and scarcity, making it a highly desirable commodity as well as a symbol, and eventually a store of wealth. However, as time progressed, the gold standard was adopted as a form of global currency and now, even though the fiat system has replaced it in its entirety, gold continues to hold intrinsic and economic value, making it a popular investment in financial markets.

As discussed in the what is gold article, there are several factors that may influence it as an investment including:

• Supply and demand

Although most commodities are subject to supply and demand, gold is almost always in demand, whether it be for jewelry, industrial uses or as a form of safe-haven currency.

A few unique characteristics that contribute to gold’s success include its scarcity, ductility, and ability to withstand corrosion, making it a versatile metal with many uses . However, the demand for gold is also largely attributed to its ability to retain value during periods of financial duress.

During economic slumps, the demand for gold as an inflationary hedge often increases, confirming its safe-haven appeal. As far as supply is concerned, once gold has been mined and has gone through the refinery process, due to its resilience against corrosion, gold remains in supply, being transformed into gold bars, coins, jewelry, etc.

• Government Policies

Unlike paper money, gold is a physical commodity that has no default risk and is not impacted by government policies. During periods of economic uncertainty such as a financial crisis or political instability, central banks may intervene by decreasing interest rates or printing more money, leading to a rise in inflation and a depreciation of currencies. Whilst this may result in a loss in purchasing power of paper money, gold may be used as an inflationary hedge, making it a popular investment during these times.

• US Dollar

Because gold is generally traded against the US Dollar, changes in the currency tend to have a direct impact on the gold price. A stronger Dollar generally makes gold more expensive for other countries to buy, resulting in a decrease in demand and therefore, a drop in the gold price. The opposite is true when the Dollar depreciates. However, risk sentiment also plays a role in the inverse relationship between gold and the greenback.

During economic slumps or periods of increased volatility, the demand for currencies and stocks may decrease as investors increase exposure to gold, and other assets holding intrinsic value.

GOLD AS A TRADEABLE COMMODITY

Although coins, gold bars and bullion are still collected and central banks generally still keep a certain amount of gold in reserves, the easiest way to gain exposure to the precious metal is by trading it on exchange, investing in gold companies or trading ETFs which track the gold price.

The same factors that influence gold as an investment will likely influence it as a tradable commodity but because the gold market is so large, high trade volumes, combined with ample liquidity and almost 24-hour trading, allow for tighter spreads, making gold relatively inexpensive to trade. In fact, the World Gold Council estimates that the average daily trading volume in gold is higher than the majority of currency pairs, except for three major currency pairs, namely EUR/USD, USD/JPY and GBP/USD.

GOLD PRICE ACTION

When it comes to trading gold, price action is influenced by a variety of factors including trading psychology as well as technical and fundamental analysis. Although a variety of strategies exist, an all-encompassing strategy, combining these three forms of analysis may provide additional benefits.

Gold Technical Analysis

The process of technical analysis involves identifying patterns off of charts in an attempt to identify current market conditions and trends that have occurred in the past and may occur in the future, using price action and technical indicators as a guide.

Although determining the trend may sound simple, deciding on an appropriate time frame can be a challenging task. While intraday traders often make use of short-term charts to determine potential entry and exit signals, there are benefits to multiple time-frame analysis, which includes analysis from both long and short-term charts.

For novice traders, four effective trading indicators include the Moving Average, Relative Strength Index (RSI), Moving Average Convergence/Divergence (MACD) and the Stochastic, while more experienced traders may use more complex tools such as the Fibonacci retracement or Elliot Wave, in conjunction with other indicators.

An example of this can be seen in the Daily chart below, where the Fibonacci retracement is taken from the most recent major move (between the March 2020 Low and the August 2020 High). Since retracing from this level, these retracement levels have formed support and resistance for price action, forming areas of confluency, which has somewhat transformed market conditions from a trending to a rangebound state.

Gold Daily Chart

By adding the Relative Strength Index (RSI), a trader may be able to identify potential signals as indicated above. When the RSI is above 70, the market is considered overbought and when the RSI falls below 30, it is considered to be oversold. It is important to remember that market conditions are subject to change, but if a trader is using the RSI during a trending phase when the trend ends, they may shift towards an RSI range trading strategy.

Gold Fundamental Analysis

While technical analysis focuses on chart patterns, assuming that everything has already been priced in and accounted for, fundamentals believe that economic events are the main drivers of price action. Although neither is incorrect, during a recession or economic uncertainty, changes to policies are often sporadic and tend to influence risk sentiment without prior warning.

When we refer to fundamentals, broadly speaking, this is the economic wellness of a country or economy. Data such as GDP, inflation, and interest rates all form part of fundamentals. When investors are confident in the state of the economy, they are more likely to invest in riskier assets, such as stocks. But, when interest rates are low and there is a lack of confidence, this is referred to as risk-off sentiment, where investors are more likely to invest in gold, US treasuries, and other safe-haven assets.

A few examples of economic data that may have an affect on gold prices include GDP data, unemployment figures, and interest rate decisions. Although the effects of these decisions may not be instantaneous, the Dailyfx economic calendar is a useful tool for traders to remain informed about high-impact data that may affect the markets.

Read more articles in the Educational Content category to update the latest forex knowledge from Pipscollector.

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Pipscollector.com - Gold is among the most valued commodities in the world, with a history of utility in currency and jewelry as well as being a favored safe haven asset. In this article, discover what gold is used for, the history of the market and how it works, and what affects gold prices.

MAIN TALKING POINTS

• What is gold and what is it used for?
• What affects gold prices?
• How can gold be traded?

WHAT IS GOLD AND WHAT IS IT USED FOR?

Gold is a precious metal coveted throughout history for its vibrant color, malleability, and relative scarcity. It has industrial applications in electronics and computing, and is enduringly popular as a jewelry-manufacturing component. Gold has always been used as a monetary instrument, as well as a safe haven asset due to its tendency to retain or increase its value during periods of market turbulence.

HISTORY OF GOLD AS AN ASSET CLASS

For thousands of years, humans have placed a high premium on gold. It has represented the currency of some of the world’s most famed civilizations, such as the empires of Ancient Egypt and Rome. More recently, from the late 19th century up until the outbreak of World War One, the value of currencies have been anchored to a specific amount of gold.

Starting at the end of the World War Two, most of the planet’s largest economies operated within a financial system based on a set gold price, which was tied to the US Dollar. This only ended in 1971, when the US opted to stop aligning its dollar with the commodity.

While the precious metal no longer functions as an official currency, the gold price remains a highly influential element in financial markets and world economies.

WHAT AFFECTS GOLD PRICES?

The factors that affect gold prices include stability, supply and demand, central bank exposure, and volumes traded through ETFs.

Stability

As the bedrock financial instrument underlying global currencies, gold is considered a fairly secure asset. Its price tends to rise in times of turmoil, as governments and investors turn to it as a hedge against uncertainty. Inversely, gold prices usually drop in stable times, as riskier yet potentially more profitable avenues of investment become more viable.

Supply and demand

As with most assets on the open market, an excess of demand for gold (normally for jewelry-making, or manufacturing certain medical, industrial and technological products) drives up the gold price (assuming supply is constant). On the other hand, a weakening of demand often has the opposite effect on its value, sending the price lower (assuming supply is constant).

Central banks

Many of the world’s gold reserves are controlled by central banks within developed nations, in locations such as Europe and North America. As a result, these banks wield immense pricing power in global gold markets. If the banks suddenly increased or reduced their gold exposure at once, even slightly, this would have a magnified effect on the gold price. Central banks therefore rely on a joint (though unofficial) commitment to refrain from unilaterally engaging in large-scale gold sales that could destabilize global markets.

ETFs

While exchange traded funds are generally intended to mirror the gold price rather than influence it, many large ETFs hold a significant amount of physical gold. Therefore, the inflows and outflows from such ETFs can affect the metal's price, by altering the physical supply and demand in the market.

HOW GOLD AFFECTS CURRENCIES

When it comes to gold’s relationship with currencies, its correlation with USD is a principal talking point as the US Dollar remains the benchmark pricing mechanism for gold. When the value of USD increases, gold becomes more expensive for other nations to purchase.

This ultimately causes demand to fall, which is why there’s generally an inverse relationship between the US Dollar and the gold price. Additionally, when the Dollar starts to lose its value, investors look to gold as a safe-haven alternative and this helps to push its price up.

The below chart shows this inverse relationship between the US Dollar Index and gold.

GOLD PRICES OVERLAID AGAINST THE US DOLLAR

Also, the value of gold is linked to the value of a nation’s imports and exports. Countries that export gold or have access to gold reserves will see their currencies strengthen when gold prices rise, due to the value of the country's total exports increasing.

HOW CAN GOLD BE TRADED?

There are a number of ways to trade gold, as explained in our in-depth guide to gold trading. It can be purchased as a physical asset, traded using futures and options in the commodities market, or traded through an exchange traded fund or ETF. For more information on each of these, click on the link above. For more information on each of these, click on the link above.

REASONS TO TRADE GOLD

Traders might consider trading gold because:

• As a safe haven in times of economic turbulence, when it tends to hold its value or appreciate
• To capitalize on a weak US Dollar, and hedge against inflation
• To maintain a diverse portfolio of commodities, stocks, bonds etc.

Read more articles in the Educational Content category to update the latest forex knowledge from Pipscollector.

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