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Home > Investing > Factors That Affect Gold Prices: Useful Considerations For Online Traders

Factors That Affect Gold Prices: Useful Considerations For Online Traders

George Sterling | Wednesday, November 28th, 2012

Buying gold and investing in it are two different things and according to experts, the latter makes a more viable choice than the former. While investing in gold, you should have complete understanding of the factors that influence gold prices in order to maximize gains and minimize losses. Today, I am going to discuss some factors that should be kept in consideration while trading gold online. These factors play an increasingly crucial part in gold price fluctuations.

State Of United States Economy

The U.S economy is the largest economy in the world and what goes on there affects gold prices to a great extent. The behavior of the U.S economy impacts gold prices as United States is one of the biggest buyers of gold. Additionally, when the U.S economy slows down in terms of lower growth, it affects other economies as well as gold. When the United States economy experiences a slow down, gold prices will fall.

European Debt Crisis

One of the biggest factors affecting gold prices is the ongoing debt crisis in the European zone. If the crisis continues to worsen as it has in the last many months, gold prices will remain volatile. Moreover, when the European banks sell gold reserves for liquid cash, there will be an overall increase in gold supply in the market which will bring a decline in prices. Another thing to consider for online gold traders is quantitative easing. When central banks across the world float monetary stimulus, it will bring a rise in inflation and that will subsequently bring an increase in gold prices as money loses its value due to rising inflation.

CME Decisions

CME decisions also affect gold prices to a great extent. When CME decided to increase margins on precious metal contracts including those of gold and silver in the past, it led to a decline in the prices of the two metals. CME is equipped to manipulate the market as whenever there is an increase in gold prices, CME controls it by adjusting the margins.

Major Currencies And Their Behavior

Major currencies including Euro, Australian dollar and Canadian dollar greatly affect gold prices as well. When there is fluctuation in the currencies, gold prices also experience volatility. Before trading, it is important to keep a tab on the currencies market and see how major currencies are reacting against one another. Keep in mind that when the U.S dollar depreciates against major currencies, gold prices tend to rise.

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