The Tricks to Gold Investing
The gold market is volatile and uncertain. Gold investing could go either way - potentially advantageous or disadvantageous.
If you are new to gold investing, there are companies that can help you buy, sell, trade this precious metal in the gold market. The products sold and traded in this market should be certified by authorities.
Like other investments, the price is determined by the law of supply and demand particularly hoarding and dis-hoarding. Hoarding and dis-hoarding influence the price more than anything else. This is because the gold first mined may still exists up to now and may be sold for a price.
Since there are more gold hoarded than produced annually, the price of gold is influenced greatly by changes in the person's attachment to the gold rather than changes in the production.
The International Monetary Fund and Central Banks are important in gold investing particularly in pricing the gold. In 2004, central banks and organizations account for 19 percent of the above-ground gold which they hold as official gold reserves.
The Washington Agreement on Gold (WAG) which was released September 1999 provides limits for gold sales by members to 400 tonnes or less per year. The members affected by this agreement are Europe, United States, Japan, Australia, Bank for International Settlements and International Monetary Fund. Central banks based in Europe such as Bank of England and Swiss National Bank important sellers of gold around this time.
Russia, Argentina and South Africa wanted to increase their gold holdings in November 2005. Gold comprise 16% of the United States Federal Reserve while China's reserves hold 1% gold.
In gold investing, central banks do not announce gold purchases but Russia openly expressed its need to increase gold reserves by 2005. The same thing happened to China who was keen on gold investing in early 2006. China wanted to increase gold investing because gold represents only 1.3% in its reserves.
Inflation scares also influences gold investments. Higher consumer price index level often means higher gold investing.
Methods of Gold Investing
Fundamental Analysis - Some investors based gold investing decisions on fundamental analysis. The investors look at the macroeconomic situation such as GDP growth rates, inflation, interest rates, energy prices and productivity. Also the supply and demand of gold.
Technical analysis - Technical analysis for gold investing requires the use of chart patterns, moving averages, market trends and economic cycle.
Using leverage - In gold investing, this is when investors borrow money using their existing gold assets as collateral to be able to buy more gold. These investors would seek loan in currency with lowest interest rates such as Japanese yen.
