Global Economic Slowdown Encourages Trade with Gold
Gold is often seen as a safer option in today’s uncertain economic and financial environment, with many investors unsure of the direction and safety of other currencies. With its continued success as a reliable commodity, investors are anticipating the future of gold.
The forex industry is a vast one that has provided the circulation of international trade on currencies since 1973. With its primary purpose being to facilitate international trade and investment, the forex industry provides businesses and individuals with the opportunity to exchange currencies for the purpose of making financial gains.
The foreign exchange industry operates ‘over-the-counter’ and thus has no physical location. It was originally developed to facilitate cross-border trade conducted in different currencies by governments, companies and individuals. Whilst these markets primarily existed to encourage international movement, the role of the forex market now encompasses far more than international trade. Speaking about the forex industry, a professional marketing executive in the industry, Ms. Alippa, stated:
“Foreign exchange is an ever-growing industry, crucial to the world’s economy and accessible by a wide range of participants, from small private investors to large financial institutions”.
Rather than being exclusively available to long-term experts, forex is an accessible industry for anyone who is looking to trade currencies and potentially make a profit.
But with global economic concerns and political unrest now commonplace throughout the world, in today’s volatile environment, it is difficult to be certain if placing trades within the forex industry is advisable, and if so, where to place those trades. The continuously changing nature of the foreign exchange market can be disconcerting for many would-be investors, who fear that a lack of knowledge and awareness of the complexities of the forex market could result in significant losses, rather than gains.
Speaking further on the matter, Ms Alippa stated:
“Understanding how to invest money in the foreign exchange market can seem quite daunting to many investors, who often do not have the required time to invest in understanding this industry. However with a little time and many free tools readily available, learning how to place trades on the foreign exchange market can prove extremely lucrative”.
Despite the volatility of most currencies, gold has stood the test of time as a solid and reliable commodity over and above most others. Despite being a metal, gold has been used as a form of exchange for thousands of years, and was in circulation long before paper and coins were available for the buying and selling of goods.
In recent years gold has experienced a significant growth in value and thus a huge surge in demand. CEO of a forex company and a professional analyst within the industry stated:
“Over the past decade, the price of gold has risen from as low as US$250-300/oz to almost US$1800/oz as we speak.”
Investing in gold can therefore prove advantageous to any would-be investor, as it is considered a consistent and reliable form of currency and exchange.
Forex today is considered an excellent option for investors who wish to grow their assets in a liquid and ever-moving industry, and if there is uncertainty in choosing the right currency to trade with, gold is often considered a ‘safe’ option. Speaking further on the matter, the analyst added:
“Gold has recently been considered (over the past decade) as the primarily ‘safe haven’ financial instrument for any investor to buy, in order to avoid global turbulence and falling prices in most global asset classes”.
This is why, throughout history, gold has sustained its reputation as a dependable commodity. In today’s vastly fluid economic environment, gold is being increasingly used to place trades with in place of other classes, such as equities, bonds, fixed income and forex.
Speaking again on the matter, the expert stated:
“It’s all about the world’s problems, whether this is Europe, US, Asia (and so on), which drives investors in the safe haven purchasing of gold”.
Gold is generally purchased as a hedge against economic, political and social crises. As most central bank’s wealth is held in gold, investors view gold as a solid, worldwide commodity, that will not suffer at the hands of any economic, political and social unrest.
With recent figures demonstrating gold’s success as a successful metal, the direction of gold seems to be very positive. Since 2001, the price of gold hit an all-time high of $1663.40, having experienced its most dramatic increase in value of all time. August 2011 saw much activity for gold as it experienced an increase in value of 6.8% since July, despite Eurozone debt and slow growth for other currencies. In addition, it is believed that the value of gold can only increase further. Speaking again on the matter, the professional financial analyst stated:
“I tend to see gold rising to as much as US$2000/oz within the year, given the continuous subprime and sovereign debt issues faced both within the Eurozone and the US”.
With this in mind, it can be understood why many investors choose gold as their main trading option. Despite being subject to speculation, gold continues its rise in value. Nevertheless, despite widespread belief that gold is a consistently safe commodity to conduct trade with, there is no way of knowing the true future direction of gold, whether this be within the coming months or the coming years.
Despite being notoriously steadfast, gold has also experienced occasional slumps. Since entering the foreign exchange market, the value of gold has experienced many augmentations and declines, and since 1968, the price and value of gold has varied significantly. During both stock market crashes (1987 and 2008) gold performed poorly, and has experienced a range of values on the stock market since it was first introduced in 1919.
With evidence of other currencies, such as the Swiss Franc (CHF), rising dramatically during the course of 2011, there are indeed currencies that are demonstrating continuing strength and endurance, that could potentially outshine the strength of gold. In the meantime, gold’s enduring strength as a commodity still continues to persevere, motivating many investors to avoid risk, play safe and trade with gold.
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Category: Investment Ideas
