User:MacNachtanBarhydt1073

2012-02-18T15:44:20Z

MacNachtanBarhydt1073: Created page with "Gold has traditionally been viewed as a safe investment for maintaining wealth especially in the face of inflation. This may not be the case with gold futures as they are a diffe..."

Gold has traditionally been viewed as a safe investment for maintaining wealth especially in the face of inflation. This may not be the case with gold futures as they are a different type of investment, and are contracts to buy or sell in the future at the future price. As prices change the value of the contract changes and since futures contracts are bought on margin a change in price may require more money to be put up or closing the deal at a loss.

Successful Gold Futures Speculation

Successful speculation in gold futures requires the ability to analyze prices to determine the direction the prices will move. Then, place transactions accordingly, that is go long or go short depending on your analysis. Predicting future prices of any commodity including gold requires study of past gold prices and the circumstances that resulted in those prices, that is what caused the prices to move either up or down. Once the speculator determines factors that move price, trades can be made based on solid criteria.

History Of Gold Prices

From the Middle Ages until 1931 prices remained stable. In 1931 Britain abandoned the gold standard and prices began to fluctuate. In 1935 the US set the price at $35 an ounce. When Britain devalued the pound in 1941, its prices increase from 8.66 pounds per ounce to 12.50 pounds per ounce. In the early 1970s the dollar was devalued and by 1972 its price was $42.22 per ounce. After that the dollar floated and its value dropped as gold's price rose to $850 or just a little under 400 British pounds per ounce.

Perceiving Gold Futures Prices

Gold future prices are based on a combination of current gold prices and a perception of which direction prices are headed and how much of a movement there will be. Gold future prices currently fluctuate up and down in the $100 range. Current gold future prices are relatively high compared to gold future prices before 1931, but are relatively low compared to future prices in the early 1970s.

Banks Sold Off Gold Reserves

Over the past decade many central banks around the world have sold off much of their gold reserves increasing the supply on the market and driving price down. Some experts think this trend will reverse in the next couple of years causing gold prices to increase. This will cause a corresponding increase in gold futures prices.

Government Stocking Gold Reserves

Other reasons for gold to increase is that worldwide demand remains high as governments use gold to fight inflation and it continues to be viewed as the international medium of exchange. Depositories and gold mines determine the supply of gold on the market. If depositories increase their holdings and mines are not able to keep up with demand prices will rise. When depositories maintain or increase their holdings it becomes more difficult for gold mining companies to keep up with demand and prices increase with increasing sooner and faster than underlying gold prices.
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