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Gold Fundamentals

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Gold Basic Fundamentals

What Market Fundamentals Can Affect The Gold Futures?

In free market economies, supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a trade in the gold market some of the basic fundamentals that you should consider are:

1. Supply The credit crisis should continue to affect both exploration activity and potential mine expansion, especially among marginal producers. The round of selling by hedge funds that were forced to sell gold to raise cash to fund significant redemptions in other financial investments is tapering off.

2. Demand Retail investment demand for gold in Q3 2008 rose 121%. The biggest surge in demand was in Switzerland, Germany, India and the US. The increased demand coincided with a fall in gold prices and increased economic uncertainty. If Governments around the globe are successful in jump-starting world economic growth, this should result in higher commodity prices in general and higher prices for metals, both industrial and precious.

3. Dollar Weakness There seems to be a growing belief in Washington that the only way to deal with both the recession and asset deflation is by creating huge amounts of liquidity. The government is doing this by printing more money and increasing deficit spending. This should inevitably weaken the value of the US dollar.

A weak dollar encourages U.S. investors to turn to gold because the metal is known for holding its value. It also encourages foreign investors to buy the dollar-denominated metal, because the cost is not as high for those with stronger currencies.

These are just some of the basic fundamentals to keep in mind when you are considering a trade in the gold market. Therefore, before opening up a commodity account to trade gold you should consult with a licensed commodity broker that follows the gold market to discuss investment strategies.

Click here to contact a commodities broker with experience in the gold market.

Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicition. This material is not a research report preparfed by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.

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