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Commodities

Commodities Markets: What Causes Changes in Gold Prices?

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Commodities Markets: What Causes Changes in Gold Prices?

Why do investors want to know about the history of gold prices? When buying and selling precious metals, investors always need to know about the dominant market trend. Knowing about the history of gold prices will help you make good decisions. Not only in minerals but other markets, as well. It is important to know more about the history of your business. It sheds light on what you should do and when. In gold, you will know why the prices change the way they changed. You also know about the high and the low season. Gold is seen as the most precious metal among the others. Its value is mostly higher than the others. Gold, until today, is used as a store for wealth. This will continue to be the case because of the changing values of fiat and paper currencies. 

Gold prices change but they still remain at a reasonable point. Therefore, gold is the best measure of wealth. This is a continuation of the traditional norms. Kings and queens stored their wealth in the form of gold. Many decades ago, gold was used as money. Our forefathers traded products for gold. Today, all that has not been eliminated. In some nations, gold is used in making coins. Though, in a small amount, gold is of great value. In some museums, you will find a collection of these coins that were fully or partially made of gold. The prices of gold have however faced changes in recent years. Today, gold is traded in electronic trading platforms. In 2011, it managed to rise up to over $1,900 before it started going down. This is to show you how much gold is valued. It is making headlines not only in physical form but also virtually.

History of Gold Prices in the U.S

Starting from the year 1791, the prices of gold in the U.S experienced changes. In 1791, the price of gold was $19.49 per ounce. 43 years down the line, the price went up to $20.69 per ounce. Increasing with $1.2 only after 43 years doesn’t seem right. In 1928, the Federal Reserve increased interest rates. This led to a recession in 1929. This made people redeem the normal currency into gold. Gold had more value compared to the dollar at this time. Due to the high demand for gold, the Federal Reserve was asked to raise the interest rates. 

In 1931, the value of the dollar increased and there was a decrease in demand for gold. In 1933, a law was stated that did not allow anyone to own bullion and gold coins. The gold was sold to Federal Reserve since private ownership was now illegal. Ever since the history of gold prices in the U.S became more interesting. The strength and weakness of the dollar have contributed to the price changes for gold. In 2011, the price of gold was at $1,895 per ounce. This was a result of the debt crisis. 

Before investing in gold, you should be aware of factors that contribute to the change in price in gold. They will enable you to know the best time to invest and when not to. There are many factors that have contributed to these changes and some of them are;

Demand and Supply of Physical Gold

Gold has many uses from making jewelry to being used as a store for wealth. When gold is in high demand and the supply is low, the prices tend to go up. This is one cause of changes in gold prices. It is not different from other markets. Any product that has a low supply compared to demand increases in price. When gold is in high supply and the demand is low, prices go down. This is because sellers have more than what the market needs. 

Inflation and Deflation

This is a sign that the economy is growing. A higher rate of inflation leads to higher prices of gold. Inflation is a result of stable political factors and motivation in economic growth. For instance, gold did not perform well during the world war. Before the beginning of World War 1, some nations adopted the gold standard. The gold standard was used to compare domestic currencies before setting the prices, to the value of a certain amount of gold. However, this came to an end when the war began. During this period, economic growth was not experienced either. Deflation happens when there is no upward growth in the economy. It is a time when there are fewer employment opportunities and investments. This leads to a decrease in gold prices.

Central Banks

Central banks are in charge of the amount of money circulating in a country. It also has a mandate to limit the amount of gold in supply. This can lead to a change in prices. Another thing is, when the central bank increases interest rates, the price of gold rises. Central banks, therefore, play a vital role in changes in gold prices.

Strength and Weakness in the U.S. Dollar

Gold is dollar-denominated. When the value of the dollar goes high, the price of gold decreases. It is also true that gold price increases with a weakening dollar value. This is because, when the dollar becomes weak, the currency in other nations become stronger. When this happens, the demand for products go up, gold is one of them. Its demand goes high leading to a rise in its price. 

Conclusion

The story of gold prices starts way back in history. However, today it remains highly valued. As time went by, gold coins were used instead of gold bars. Today, gold remains to be a treasure. If you have gold, you feel that you are rich. This is because of the value it has and how much it is worth. A small piece of gold will go for dollars. Most importantly, people in the buying and selling of gold should not overlook its journey.

Gold, Precious Metals

Precious Metals: Gold Is Basing For Next Bullish Wave

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Precious Metals: Gold Is Basing For Next Bullish Wave

In 2019, one of the market’s most surprising stories has been the massive bull trend movement that has been established in gold.  Additionally, a series of unpredictable changes occurred in the realm of monetary policy, as the Federal Reserve has already broken with its long-standing position to raise interest rates as a way of preempting continued expectations for growth.  In the U.S., the latest evidence in the national GDP readings implies growth rates that are close to zero for the fourth quarter. Overall, this is not a bullish scenario for stocks —even with the S&P 500 trading near its record highs. 

My regular readers know that I often tend to look at market inflow activity in some of the precious metals industry’s most popular exchange-traded funds (ETFs).  This would also include instruments like the VanEck Gold Miner’s ETF, which is a topic I have discussed in a prior article.  Ultimately, this type of approach to baseline fundamental analysis can provide important clues that help identify price trends that are likely to begin reversing relatively soon.  

Most directly, we can see that recent activity in the SPDR Gold Trust ETF (NYSE: GLD) has shown outflows worth $1,308.7 million over the last four weeks.  However, this figure might paint a very different picture when compared to various time horizons. In the last 13 weeks, GLD has seen inflows of $2,330.9 million but this figure actually grows to $7,191.3 million over the past 26 weeks.  Overall, these are significant differences that give us a fundamental reason to believe that there will be underlying strength in any technical trading events that are generated as a result of 2019’s bullish trend moves.

Gold GLD

Traders should define the major rallies in precious metals as a development the occurred after the beginning of summer.  However, the true origins of that really actually began much earlier (as commodities markets were confirming their lows near the end of 2017).  In this chart, I have outlined a series of levels that could prove to be pivotal in the event we see a true bearish reversal in the price of precious metals.  

Using the price valuations in GLD, we can isolate these important price levels as falling near $106.80, $112.05, and $126.50.  This first level marks the lows from December 2016 while the second level marks the lows from August and September 2018. The third level on the GLD price chart shown above is meant to mark the highs from February 2019.  This final price zone will now be expected to act as support once the GLD valuation overcame resistance at these levels.

Gold GLD

Shorter-term, the confluence of these technical factors suggest we are likely to begin basing above the $126.50 region.  Evidence supporting the bearish outlook would include the slowing momentum levels that are present on the daily charts. In my own trading, I will be paying special attention to the technical indicator readings in the Commodity Channel Index (or CCI).  I expect to see the first clues of short-term reversal in the CCI reading. Longer-term charts (weeklies) are clearly positive and it seems to be just a matter of time before that prior uptrend resumes.  

Initial resistance levels suggest traders will likely target $147.10, which was the price high from September.  However, the price targets that could be reached if these levels are broken could be outrageous. Long-term readings in market momentum remain favorable and the short-term retracements we have seen to the downside could create some new buying opportunities in the weeks ahead.  For additional information on how I use the Commodity Channel Index to gauge price momentum, readers might be interested to see my Momentum Trading Tutorial which explains in greater depth some of the ways these technical charting tools should be interpreted.

 

Commodities

Gold Prices: Precious Metals Rally to 5-Week Highs

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The SPDR Gold Trust ETF is now trading at 5-week highs.  Stalling momentum in stock markets and the prospects of lower interest rates policies in the US suggest that precious metals could rally in the first half of 2018.  Generally speaking, there is a strong divergence between the activity that is seen in the stock markets and the precious metals markets so we will watch to see if this continues in the financial markets during the next few months.